KLINGE CORPORATION v. USA

Filing 76

UNPUBLISHED OPINION. Signed by Senior Judge Eric G. Bruggink. (jpk1)

K L I N G E CORPORATION v. USA

D o c . 76

In the United States Court of Federal Claims
N o . 08-551C (F ile d : September 23, 2009)1

************************ K L IN G E CORPORATION, Plaintiff, v. THE UNITED STATES, Defendant, and S E A BOX, INC. In te rv e n o r. ************************ _________ O P IN IO N _________ B R U G G IN K , Judge. P e n d in g is plaintiff's ("Klinge") Motion for Attorneys' Fees and E x p e n s e s pursuant to the Equal Access to Justice Act ("EAJA"), 28 U.S.C. § 2 4 1 2 (2006), filed on May 8, 2009. Plaintiff requests reimbursement of fees a n d expenses in the amount of $37,024.99. Defendant opposes the motion,

This opinion was originally issued under seal on August 18, 2009. T h e parties were given an opportunity to propose redaction of sensitive in f o rm a tio n . No redactions were proposed.

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a r g u in g that its litigation position was substantially justified pursuant to EAJA re q u ire m e n ts . For the reasons stated below, plaintiff's motion is denied. BACKGROUND 2 P la in tif f filed a post-award bid protest here on March 6, 2008, seeking to enjoin the U.S. Marine Corps Systems Command ("the agency") from m a k in g an award to Sea Box ("intervenor") under Request For Proposals (" R F P " ) No. M67854-07-R05060 for an indefinite delivery, indefinite quantity (" ID IQ " ) contract for between 10 and 300 Large Field Refrigeration Systems (" L F R S " ). See Klinge Corp. v. United States, 82 Fed. Cl. 127 (2008) ("Klinge I" ). In Klinge I, we enjoined the award to Sea Box because the agency's f a i lu r e to disqualify it for non-compliance with the Trade Agreements Act (" T A A " ) was arbitrary and not in accordance with law. See 19 U.S.C. §§ 2501 e t seq. (2006); see also 82 Fed. Cl. at 137-38. The action was dismissed, and o n November 21, 2008, we awarded plaintiff attorney's fees pursuant to the E A J A in the amount of $84,068.94. O n July 31, 2008, plaintiff filed a second complaint for declaratory and in ju n c tiv e relief connected with the same procurement. Plaintiff asserted that th e agency de facto cancelled the RFP by issuing a General Services A dm in istratio n Federal Supply Schedule ("GSA FSS") Request for Quotations (" R F Q " ) for LFRSs, and that this cancellation was arbitrary, capricious, an a b u se of discretion, and not in accordance with the law. Plaintiff alleged that it was next in line for the award under the RFP and that the agency's decision to resolicit through an RFQ was pretextual and designed to steer the award to S e a Box and away from Klinge. Plaintiff requested that the court enjoin the agency from awarding the R F Q to intervenor, or alternatively, that it grant Klinge bid preparation and p ro p o sa l costs. On September 12, 2008, we denied plaintiff's request to enjoin a n award under the RFQ: Plaintiff's principal contention is that the decision to c a n c e l, or at least not pursue the solicitation through the RFP,

The facts of this case are taken from our prior opinions, Klinge Corp. v . United States, 83 Fed. Cl. 773, 776-80 (2008) ("Klinge II") and Klinge C o r p . v. United States, 86 Fed. Cl. 713, 718-19 (2009) ("Klinge III"). 2

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f o llo w e d by the use of the FSS task order, constitutes bad faith o n the part of the agency. It asserts that these decisions were p re te x tu a l, and that they were motivated by a desire to keep the co n trac t away from plaintiff and steer it to Sea Box. The short a n sw e r to this assertion is that it has no support in the record. T h is series of procurement decisions was unquestionably in a rtf u l, but we have no reason to think they were motivated by m a lice toward plaintiff or favoritism toward Sea Box. There is n o evidence that the [contracting officer] was ill-disposed to w a r d plaintiff or that he opted for a task order because it w o u ld leave plaintiff out. We are left simply with a theory of p o s t hoc, ergo propter hoc. But the mere fact that Sea Box lost th e first award and is eligible to receive a task order under the s e c o n d solicitation proves nothing. .... W e believe that the net result of finding no bad faith is th a t we cannot enjoin the second procurement. As we explained a b o v e , there is nothing inherently improper with pursuing two s o lic ita tio n s to procure fungible, but indefinite, quantities of the sa m e item. While the potential purchase under the RFP could h a v e been as high as 300 (or 1500, depending on whose view w o u ld prevail), it was still an IDIQ contract with a minimum q u an tity of only ten LFRSs. There is no necessary in c o n s is te n c y, in other words, between the two solicitations. W h ile we conclude, as we explain below, that the [contracting o f f ic e r's ] decision not to pursue the RFP was based on a mistake o f law, it was merely a mistake and in no way implicates the in te g rity of the second procurement. In short, enjoining the se c o n d procurement, which, standing alone, is not drawn into q u e s tio n , is not the appropriate remedy. .... . . . In addition, if we granted injunctive relief, the agency w o u ld only be obligated to ask for ten LFRSs from plaintiff, a s s u m in g it received the award under the RFP. Moreover, if we g ra n ted relief, at least one third party who had no responsibility f o r the mistakes in the first procurement would be directly and 3

n eg ativ ely impacted, by losing the FSS task order award. In su m , the balance of harms does not weigh in plaintiff's favor. W e therefore deny injunctive relief and grant the alternative re lie f requested, reimbursement of bid preparation and proposal c o s ts . See 28 U.S.C. § 1491(b)(2). Klinge II, 83 Fed. Cl. at 776-80. We directed the parties to confer and attempt to stipulate to the amount of bid preparation costs. The parties submitted a s t a tu s report on December 5, 2008, agreeing to bid preparation costs in the a m o u n t of $50,219.19. On December 18, 2008, defendant filed a motion for reconsideration of th e court's September 12, 2008 opinion. Defendant argued that the award of in ju n c tiv e relief with regard to the original RFP precluded the court from a w a rd in g plaintiff bid preparation costs concerning the same procurement. On D ec em b er 23, 2008, plaintiff filed a motion for reconsideration of the court's S e p te m b e r 12, 2008 opinion. In its motion, plaintiff alleged that it had o b ta in e d new information regarding the agency's inaccurate market research w h ic h called into question the factual basis of our prior opinion. Specifically, p l a in t if f argued that the new information revealed the agency's pretext against K lin g e and proved that the award to Sea Box under the RFQ was an unjustified s o le source award and a violation of Federal Acquisition Regulation ("FAR") S u b p arts 8.405-6 and 8.405-1(c)(1). O n April 10, 2009, we denied both motions for reconsideration. R e g a rd in g plaintiff's motion for reconsideration, we held: . . . [W]e limit plaintiff's standing to the argument that th e agency chose to use an RFQ instead of an RFP simply as a p re te x t, either to avoid giving the contract to Klinge or to funnel th e work to Sea Box. Plaintiff does not have standing to c h a lle n g e the validity of the RFQ in any other context. .... We will assume, arguendo, that plaintiff is correct in its a ss e rtio n that the agency did not comply with applicable p ro c u re m e n t regulations in the current RFQ. The narrow q u e stio n remains, then, whether this alleged non-compliance e s ta b lis h e s pretext. We do not believe it does. 4

.... . . . . The basic facts surrounding the use of the RFQ in th e current procurement were available to the court at the time o f Klinge II. What plaintiff currently asserts as new evidence is th a t Mr. Gallagher's assumption that three vendors were capable o f offering an LFRS was, in fact, wrong because [AAR Mobility S ys te m s ] did not offer an LFRS on the schedule. As stated in Klinge II above, however, pretext or bad f a ith involves more than mere error. The agency apparently b e lie v e d it did not have to find three vendors actually capable of su p p lyin g a completely integrated LFRS. There is no reason to c o n c lu d e , therefore, that even if the agency knew only one or tw o vendors could respond to the RFQ, it was acting against K lin g e on pretextual grounds or that it was attempting to favor S e a Box. . . . [W]e conclude that there is insufficient evidence of b a d faith or that the integrity of the procurement process was im p a ire d to warrant the extraordinary remedy of enjoining the p ro c u rem en t. As plaintiff lacks standing to request the court's re c o n sid e ra tio n of the current procurement on any other ground, p la in tif f 's motion is denied. K lin g e III, 86 Fed. Cl. at 718-19. Regarding defendant's motion for reconsideration, we held: At the outset, we can clarify that our intent in Klinge II w a s, indeed, to award bid preparation costs flowing from p la in tif f 's participation in the RFP process, the subject of Klinge I. In addition, we note that the relevant statutory language­ "[ t]h e courts may award any relief that the court considers p ro p e r, including declaratory and injunctive relief except that a n y monetary relief shall be limited to bid preparation and p ro p o sa l costs," 28 U.S.C. § 1491(b)(2)­does not explicitly limit a protestor to either injunctive or monetary relief. .... 5

. . . Although we granted injunctive relief in Klinge I, by th e time of Klinge II, it was plain that defendant had made the in ju n c tiv e relief irrelevant, at least insofar as plaintiff's real in te re sts were concerned, namely, having a chance at award of a contract. Although we held that the agency had the legal right to use a different procurement vehicle, the effect on plaintiff w a s that it no longer had a chance at an award. As plaintiff points out, recent decisions of this court m a k e clear that injunctive and monetary relief are not mutually e x c lu s iv e . In CNA Corp. v. United States, 83 Fed. Cl. 1 (2008), th e court denied defendant's motion to strike plaintiff's a p p lic a tio n for bid preparation and proposal costs after it had p re v io u sly granted plaintiff injunctive relief in a post-award bid p ro te s t. .... In short, we consider the award of bid preparation and p r o p o s a l costs an appropriate remedy under the circumstances. W e therefore deny defendant's motion for reconsideration and c o n f ir m the award of bid preparation costs. K lin g e III, 86 Fed. Cl. at 719-20. On May 8, 2009, plaintiff filed the pending motion for attorneys' fees a n d expenses arising out of its July 31, 2008 complaint and the subsequent m o tio n s for reconsideration. The matter is now fully briefed. The court has s u b je c t matter jurisdiction pursuant to the Tucker Act, 28 U.S.C. § 1491(a)(1) (2 0 0 6 ). DISCUSSION A corporation that does not employ more than 500 employees and w h o s e net worth does not exceed $7 million on the day the action was filed m a y recover attorneys' fees if (1) it is a prevailing party in a civil action; (2) th e government's litigation position was not substantially justified; (3) no sp e c ial circumstances make an award unjust; and (4) the fee application is su b m itte d to the court within 30 days of final judgment in the action and is su p p o rte d by an itemized statement. 28 U.S.C. § 2412(d)(1), (2); see Comm'r v . Jean, 496 U.S. 154, 158 (1990). 6

P la in t if f filed its EAJA application with the court on May 8, 2009, less th a n thirty days after the April 10, 2009 issuance of the court's opinion on re c o n sid e r a ti o n . The application was therefore timely filed. On the date p lain tiff filed its complaint, July 31, 2008, Klinge Corporation had a net worth o f less than $7 million and employed less than 500 employees. Plaintiff is th e re f o re eligible to apply for an EAJA award. Defendant has not challenged th e assertion that plaintiff was a prevailing party or claimed that special c irc u m s ta n c es make an award unjust. Nor has it questioned the amount of f e es , which we note are already discounted from the hours actually incurred. C o u n s e l has done an excellent job in representing plaintiff in this protracted d is p u te , so the only question is whether the government's litigation position w a s substantially justified. Substantial justification of the government's position is an issue as to w h ic h defendant holds the burden of proof. White v. Nicholson, 412 F.3d 1 3 1 4 , 1317 (Fed. Cir. 2005). A substantially justified legal position is defined n o t as "`justified to a high degree,' but rather `justified in substance or in the m a in '­ t h a t is, justified to a degree that could satisfy a reasonable person." P ie rc e v. Underwood, 487 U.S. 552, 565 (1998). A position may be c o n s i d e r e d justified "even though it is not correct, and . . . it can be s u b s ta n tia lly (i.e., for the most part) justified if a reasonable person could think it correct, that is, if it had a reasonable basis in law and fact." Id. at 566. We must "look at the entirety of the government's conduct [both prior to and during litigation] and make a judgment call whether the government's o v e ra ll position had a reasonable basis in both law and fact." Chiu v. United S ta te s, 948 F.2d 711, 715 (Fed. Cir. 1991). We note, however, that while we co n sid e r the agency's pre-litigation conduct and the Department of Justice's s u b s e q u e n t litigation position to make "only one threshold determination for the entire civil action," Jean, 496 U.S. at 159, we view that one civil action to be Klinge II and not Klinge I. The two actions are plainly related, but they a re separate. While we previously awarded fees in Klinge I, we view this issue a n e w in Klinge II. Defendant argues that its overall litigation position was substantially j u s t i f ie d because the contracting officer had a reasonable basis to believe he c o u ld not award the contract to Klinge without re-opening discussions. That b e lief prompted his decision to change procurement methods from an RFP to a n RFQ. Defendant further argues that the contracting officer's "decision to

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c h a n g e procurement methods was neither pretextual nor made in bad faith" but in s te a d an innocent mistake: . . . the contracting officer had a good faith belief that he w a s acting in strict accordance with the Court's decision [of J u n e 5, 2008] that TAA compliance could only be evaluated b a se d upon the original proposal, discussion responses, and final p ro p o s a l revision, and not upon an explanation that was offered d u rin g the course of litigation before either the GAO or the C o u rt. D e f .'s Resp. to Pl.'s EAJA Mot. at 11. Defendant posits that "in defending the c o n tra c tin g officer's determination to change procurement methods, we relied u p o n the underlying factual situation and sequence of events that occurred d u rin g the entire course of litigation." Id. at 10. Specifically, regarding the p rio r protests at the Government Accountability Office ("GAO"), defendant s ta te s that it "held discussions and requested final proposal revisions . . . and K lin g e did not attempt to clarify its proposal until the second GAO protest." Id . Moreover, defendant argues that its overall litigation position was su b sta n ti a lly justified because the CO's decision to re-open discussions "in o rd e r to take into account Klinge's adjustment to its proposal to cure its a d m i tte d lack of TAA compliance is consistent with FAR § 15.306(a) and a p a st decision of this Court." Id. at 11. Plaintiff contends that defendant was not substantially justified because " th e agency acted unreasonably by determining that Klinge's proposal failed to comply with the TAA, which served as its primary justification for c a n ce llin g the RFP." Pl.'s EAJA Mot. at 8. It claims, moreover, that " K lin g e ' s explanation of its TAA compliance plainly was not a change to K lin g e 's proposal, and it was wholly unreasonable to find otherwise." Id. F in a lly, plaintiff contends that "the agency . . . failed to argue that Klinge was n o n - c o m p l ia n t during the first COFC protest. Indeed, during those p ro c e ed in g s , it actually endorsed the Court's finding." Id. We agree with defendant that its overall litigation position was s u b s ta n tia lly justified. The more important relief plaintiff sought was an in ju n c tio n and reinstatement of the results of the prior RFP. To achieve that re m e d y, we held that something more than an innocent mistake had to be p ro v e d . Consequently, even though the CO's actions were mistaken in fact a n d law, we agreed with the government's principal argument, namely, that 8

th e re was no bad faith, no animus toward plaintiff, and no desire to help the in ter v e n o r. The points as to which we agreed with plaintiff were not, u l tim a te ly, controlling as to the principal relief sought, an injunction. Because w e accepted the government's primary argument, of necessity, its position was s u b s ta n tia lly justified. In sum, defendant's overall litigation position had a reasonable basis in b o th law and fact. Defendant's opposition to the injunctive relief sought by p la in tif f was "justified to a degree that could satisfy a reasonable person." P ie rc e , 487 U.S. at 565. Accordingly, plaintiff has failed to prove a required e le m e n t of 28 U.S.C. §§ 2412(d)(1), (2). Plaintiff's claim to recover attorneys' f e es and expenses pursuant to the EAJA in this action is therefore denied. C O N C L U S IO N T h e government's overall litigation position was substantially justified. P la in tif f has not demonstrated its entitlement to recover fees and expenses p u rs u a n t to the EAJA. Accordingly, the Clerk is directed to dismiss the a p p lic a tio n for fees and expenses. No costs. Judgment accordingly.

s/Eric G. Bruggink ERIC G. BRUGGINK Judge

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