No Award of Attorneys' Fees Under Equal Access to Justice Act if Government Position Is Substantially Justified

In a recent decision, the Armed Services Board of Contract Appeals (ASBCA) reaffirmed that, even when a contractor prevails in a claim against the Government, attorneys' fees under the Equal Access to Justice Act (EAJA), 5 U.S.C. § 504, are not awarded in cases where the Government's position in the litigation was substantially justified.

In Buck Town Contractors & Co., ASBCA 60939-EAJA, the ASBCA denied the contractor's request for $253,901.63 in attorneys' fees and costs related to the contractor's win against the Government in a claim arising from the construction of a levee project in Louisiana. During the construction of the levee, the contractor incorrectly installed geotextile material, but the Government inspected and approved the installation and did not object to the manner of installation until after the geotextile was buried under several feet of fill.

Other issues occurred on the project, including the contractor's installation of other geotextile that failed to meet strength specifications. The contractor raised three claims against the Government related to the levee construction, but withdrew one of those claims prior to hearing. The two remaining claims alleged the Government constructively waived its right to object to the manner of installation and that other rework constituted economic waste. Following a hearing, the contractor prevailed on its claim of constructive waiver by the Government.

Despite prevailing on that claim, the ASBCA denied the contractor's EAJA request. Under the statute, businesses with a net worth of less than $7,000,000 are entitled to fees (at a reduced rate) and other expenses, unless the Government's position was "substantially justified" or other circumstances make such an award unjust.

To be "substantially justified," the Government is not required to prove that it had a substantial likelihood of victory in the litigation. Rather, the Government need only show that a reasonable person could think the Government's position had a reasonable basis in law and fact. The Government's position is generally found to be substantially justified in cases with close factual questions or where there is greater legal uncertainty.

Notably, while the ASBCA agreed with the Government that its position was substantially justified, it rejected the Government's argument that the ASBCA's finding of waiver was a "deviation from the norm." While acknowledging that waiver defenses are rarely successful, the ASBCA stated the facts of the case were the deviation—rather than its holding. Specifically, the ASBCA noted the contractor's actions in installing the geotextile was "so conspicuous, including expressly detailing its actions in the daily reports, that the contracting officer should have known of the actions." However, recognizing the situation was unusual the ASBCA held the Government's position was substantially justified and denied fees under EAJA.