Sterling Federal Systems, Inc. v. Daniel S. Goldin, Administrator, National Aeronautics and Space Administration
Docket: 92-1552
Court: Court of Appeals for the Federal Circuit; January 27, 1994; Federal Appellate Court
Sterling Federal Systems, Inc. (Sterling) appeals a ruling from the General Services Administration Board of Contract Appeals (GSBCA) regarding the denial of certain consultant fees and employee salaries incurred during a successful procurement protest against the National Aeronautics and Space Administration (NASA). The GSBCA had awarded Sterling its attorneys' hourly fees and out-of-pocket expenses but denied the costs associated with its salaried employees and expert consultant fees, except for limited witness-related compensation. The court found that the GSBCA erred in interpreting 40 U.S.C. § 759(f)(5)(C)(i) as limiting recoverable costs to those allowable under 28 U.S.C. §§ 1920 and 1821, along with attorney's fees. Consequently, the court vacated the GSBCA's decision and remanded the case for a new determination regarding Sterling's entitlement to broader costs, including those related to expert consultants and salaried personnel. Sterling had originally sought $598,908.34 in fees and costs, which included detailed breakdowns of attorneys' fees, disbursements, and in-house labor expenses linked to the protest.
The board acknowledged a shift from its previous practice of awarding all necessary and reasonable expenses in automatic data processing equipment procurement protests, which typically included full expert consultant fees. Historically, the board permitted recovery of reasonable costs for expert consultants due to the complexity of the technical information involved, which required knowledgeable individuals to interpret proprietary data that attorneys could not access or disclose to their clients. However, the board determined it could not award expert fees under the Competition in Contracting Act (CICA), interpreting the Supreme Court's decision in *West Virginia University Hospitals, Inc. v. Casey* as limiting "costs" to those traditionally associated with litigation as specified in 28 U.S.C. § 1920, thus requiring that any additional costs be explicitly identified within the statute. Consequently, the board ruled against reimbursing salaries of employees unless they served as witnesses, aligning with the established practices under the Equal Access to Justice Act (EAJA). Dissenting opinions from four judges argued for a broader interpretation of costs under the CICA, suggesting that it should include expert fees and employee salaries, but the majority rejected these interpretations, asserting that the GSBCA's authority to shift costs is narrower than that of federal courts.
Sterling appeals the board's decision denying expert fees and employee salaries, contending that the board misinterpreted 'costs of filing and pursuing the protest' under 40 U.S.C. Sec. 759(f)(5)(C) in light of the Supreme Court's ruling in West Virginia. Sterling argues that the term 'costs' should encompass reasonable litigation expenses, highlighting the board's historical practice of granting such fees. Conversely, the government asserts that 'costs' should adhere to the definitions in 28 U.S.C. Sec. 1920 and Sec. 1821, which do not permit the award of expert fees or employee salaries except for limited witness compensation. The government emphasizes that the CICA constitutes a waiver of sovereign immunity and must therefore be interpreted strictly in favor of the United States. The CICA allows the board to declare entitlement to costs at its discretion, which is subject to review for abuse of discretion. An agency may abuse its discretion if its decision is unreasonable, based on erroneous legal conclusions, relies on incorrect factual findings, or lacks evidential support. Questions of law related to the board's entitlement decisions are reviewed de novo, as they are not final and conclusive. Additionally, costs cannot be awarded against the United States without explicit statutory authorization due to sovereign immunity principles, which require strict construction in favor of the government.
Statutory provisions from the Supreme Court case in West Virginia do not apply to the GSBCA, as the GSBCA is not classified as a 'court of the United States' under 28 U.S.C. § 451 (1988). Sections 1920 and 1821 of Title 28 authorize U.S. courts to tax certain costs but do not extend to the GSBCA. Instead, 40 U.S.C. § 759(f)(5)(C) allows the GSBCA to award costs related to protests and bid preparation, but it does not explicitly incorporate § 1920. The government contends that 'costs' refers to those listed in § 1920, which has a historical context of cost recovery originating from English common law and evolving through various statutes in the U.S. Federal courts originally adopted state practices until Congress standardized allowable costs in 1853, leading to the current provisions in § 1920. The history indicates that § 1920 is not a definitive source of traditional cost definitions but rather a framework for taxable costs in U.S. courts. Contrary to the government's interpretation, the Supreme Court's ruling in West Virginia does not mandate that 'costs' must align exclusively with those in § 1920. The precedent set in Crawford Fitting Co. v. J.T. Gibbons, Inc. emphasized that federal courts cannot award costs beyond those specified in § 1920 without express authority, reinforcing that § 1920's limitations must be adhered to, thereby preventing broader interpretations that would nullify its significance.
The Supreme Court of West Virginia ruled that federal courts lack the authority to award fees for non-testifying experts under 42 U.S.C. § 1988, which allows for recovery of "reasonable attorney's fees" as part of costs. This determination was based on the premise established in Crawford Fitting that 28 U.S.C. §§ 1920 and 1821 delineate the limits of a federal court's power to shift litigation costs without explicit statutory authorization. The Court found that neither of these sections permits the shifting of non-testifying expert fees.
The Court examined whether the language in 42 U.S.C. § 1988, allowing for the shifting of "attorney's fees," constituted the necessary statutory authority to exceed the limits set by §§ 1920 and 1821. It concluded that it did not, emphasizing that attorney's fees and expert fees are distinct components of litigation costs. A dissenting opinion suggested that expert fees could be considered part of "costs" under § 1988, but this was rejected by the majority.
The document argues that the rationale from West Virginia and Crawford Fitting does not apply to the GSBCA's (General Services Board of Contract Appeals) cost-shifting authority under the CICA (Contract Disputes Act). Unlike § 1988, which merely refers to "costs," CICA specifically allows for the recovery of costs associated with filing and pursuing procurement protests, indicating a broader scope.
Additionally, while West Virginia primarily focused on attorney's fees, which are a specific type of litigation cost, the term "costs" has historically encompassed a range of expenses. The interpretation that "costs" in any cost-shifting statute must align strictly with those in 28 U.S.C. § 1920 is deemed overly restrictive and burdensome for Congress, as it would necessitate explicit enumeration of allowable costs for various contexts distinct from federal court settings.
The board interpreted the Equal Access to Justice Act (EAJA) provisions for administrative agencies, specifically 5 U.S.C. Sec. 504, to restrict the Costs Imposed under the Contract Disputes Act (CICA) to those listed in 28 U.S.C. Sec. 1920. However, a comparison with the EAJA provisions applicable in federal court, 28 U.S.C. Sec. 2412, indicates that Congress intended a broader interpretation of "costs" under CICA. In EAJA Sec. 2412, three categories of awards are defined: costs as per section 1920, fees, and attorney expenses, while EAJA Sec. 504 only references "fees and other expenses." The distinction suggests Congress intentionally excluded specific limitations in the administrative context, favoring a more general allowance of litigation expenses in CICA.
The interpretation of "costs" is further supported by examining 40 U.S.C. Sec. 759(f)(5)(C), which contains two clauses dependent on the term "costs." Subsection (i) allows costs for "filing and pursuing the protest," while subsection (ii) covers "bid and proposal preparation." The government argued that section 1920 costs are not applicable to subsection (ii) and that this subsection need not be considered. However, established statutory construction principles dictate that the entire statute must be examined to avoid rendering any part nonsensical.
The government contended that "costs" could hold different meanings in each subsection, but this interpretation is rejected. A strict construction of waivers of sovereign immunity does not support narrowing the liability Congress intended. Therefore, the language of the waiver should not be twisted to assign varying meanings to "costs" within the same context.
The board's assertion that it lacks the authority to shift expert fees and employee salaries, based on comparisons to other tribunals and the notion that its power must always be lesser than federal courts, is rejected. The board's authority is defined by statute and differs from that of federal courts, but that does not necessitate a general conclusion that its powers are inferior. The CICA does not uniquely prevent the shifting of non-testimonial expert fees, as similar provisions exist in other jurisdictions. The term "costs" in 40 U.S.C. Sec. 759(f)(5)(C)(i) is interpreted to potentially include a broader range of expenses than those outlined in 28 U.S.C. Sec. 1920 and Sec. 1821. The board had previously defined "costs" as "all necessary and reasonable expenses" related to protests, and Sterling argues that this should encompass expert fees and employee salaries based on past practices. Sterling asserts that the CICA aims to fully compensate the prevailing protester to encourage the assertion of procurement rights. The government, while not disputing the board's past interpretation, contends that allowing all expenses could lead to excessive litigation costs, potentially undermining efficient procurement and contrary to legislative intent. Both parties present valid arguments: costs should compensate for actual damages incurred, but overly broad reimbursement could discourage the defense of legitimate procurement decisions.
Under the CICA's unidirectional cost-shifting scheme, losing protesters do not incur litigation costs, which may encourage unjustified litigation due to a lack of financial risk. The CICA was designed to handle complex procurement protests distinctly, giving the GSBCA discretion to determine recoverable costs, unlike the rigid cost controls imposed by 28 U.S.C. § 1920 as noted in Crawford Fitting. The statute's lack of specific cost definitions allows trial courts significant discretion in cost allowances, balancing the need to encourage litigation against controlling costs. Additionally, the GSBCA, as part of an administrative agency, operates under this discretionary framework. Past GSBCA decisions emphasized the CICA's purpose of facilitating competition in federal procurement and promoting private enforcement of laws, with cost-shifting intended to support valid claims rather than penalize losing parties. The GSBCA has previously ruled that it is not bound by Section 1920 and 1821, stating that reimbursements should not exceed what would be taxable under those sections. In prior cases, the board has allowed certain costs while limiting others, such as expert fees, based on specific circumstances outlined in the CICA.
The GSBCA, in its decision related to Grammco Computer Sales, allows recovery of personnel costs for salaried employees when associated with filing and pursuing a protest, diverging from its earlier ruling in Computer Marketing, which limited recoverable costs to witness-related expenses under section 1821. Consequently, if applied to Sterling's case, this practice would likely enable recovery of substantial expert fees and employee salaries. However, since some of Sterling's experts and employees acted as witnesses, not all of their costs would be recoverable under past practices.
The Supreme Court's ruling in West Virginia and the federal cost-shifting statute (28 U.S.C. Sec. 1920) does not prevent the GSBCA from awarding these costs under the CICA but does not mandate it either. To deny Sterling's claims, the GSBCA must either distinguish these costs from those previously awarded or justify a change in practice. The GSBCA did not assess the allowability of these costs due to perceived restrictions from the West Virginia decision, aside from allowing testifying witness fees. As a result, the previous decision is vacated, and the case is remanded for the GSBCA to reassess which expert and employee costs are allowable, considering factors such as reasonableness, relevance, and consistency with other cost-shifting statutes. Each party will bear its own costs related to the appeal.
Attorneys' out-of-pocket disbursements total $154,503.43, categorized as follows: travel expenses (airfare, hotel, meals, car rental) amounting to $22,951.39; court reporters' fees at $12,675.50; secretarial/administrative overtime costing $8,159.00; photocopying at $4,666.35; computerized legal research totaling $3,204.27; facsimile transmissions at $2,070.20; meals costing $1,758.11; local transportation at $1,543.65; Federal Express charges of $1,193.79; long-distance telephone calls at $1,010.59; computer rental costing $578.00; courier/messenger services at $432.62; miscellaneous supplies at $213.45; postage of $22.00; expert consultant's fee at $83,500.00; expert consultant's airfare of $4,784.00; and other travel expenses for the expert consultant (hotel, meals, telephone, car rental).
In-house labor expenses total $46,888.86, which includes direct labor costs for five individuals at $25,637.64, travel expenses of $13,596.77, fringe costs of direct labor at $7,549.52, and miscellaneous expenses of $104.93.
Under 28 U.S.C. Sec. 1920 (1988), certain costs are taxable by a judge or clerk, including fees for clerks, court reporters, printing, and other necessary expenses. Witness fees are limited by 28 U.S.C. Sec. 1821 (1988), mandating payment of a $30 per day attendance fee, with allowances for travel and subsistence. Following an amendment in 1990, the attendance fee increased to $40, but the GSBCA applied the $30 rate from the time of witness testimony. The board's award for expert fees is restricted to instances where the expert acted as a witness, as per 28 U.S.C. Sec. 1920(3) and Sec. 1821. Additionally, 5 U.S.C. Sec. 504(a)(1) allows for awards of "fees and other expenses" under certain conditions, as defined in subsection (b)(1)(A).
Reasonable expenses eligible for recovery include those for expert witnesses, necessary studies, analyses, engineering reports, tests, and attorney or agent fees. In the current appeal, the government has not disputed any items awarded to Sterling by the GSBCA. The analysis references significant cases and legal literature, particularly discussing the extensive terminology of "costs" within the Federal Acquisition Regulations that may extend beyond the limitations set by 28 U.S.C. § 1920. Following decisions like West Virginia and Crawford Fitting, Congress enacted the Civil Rights Act of 1991 to allow federal courts to award expert fees under 42 U.S.C. § 1988. Comparisons are made with different provisions concerning taxable litigation and administrative costs, indicating that procurement protest litigation is unique. The Supreme Court has recognized various acts that allow for such shifts in litigation costs. The dissenting judges at GSBCA noted that the General Accounting Office has permitted awards for employee salaries and expert fees, and there is consensus that the fees sought by Sterling are reasonable and necessary. Cost shifting is aimed at controlling litigation, discouraging frivolous claims, and preventing unnecessary delays. However, concerns about expansive cost awards are raised, including the potential remoteness of expenses, difficulties in assessing reasonableness, and the validity of claims, with arguments against excessive cost recovery suggesting it could hinder the resolution of legitimate disputes.
