July 28, 2017

COOK MAIL CARRIERS, INC. v. UNITED STATES POSTAL SERVICE

PSBCA No. 6583

PATRICIA JOY SASNETT v. UNITED STATES POSTAL SERVICE

PSBCA No. 6584

APPEARANCE FOR APPELLANT
Joshua B. Sullivan, Esq.
Knowles & Sullivan, LLC

APPEARANCE FOR RESPONDENT
Jessica J. Stringer, Esq.
United States Postal Service Law Department

OPINION OF THE BOARD ON EAJA APPLICATIONS

Cook Mail Carriers, Inc. and Patricia Sasnett filed timely applications for $23,065.80 in combined attorney fees and expenses under the Equal Access to Justice Act (EAJA), 5 U.S.C. § 504.  We grant the application in limited part, and award $1,490.
The EAJA applications are based on our combined decision in Cook Mail Carriers, Inc. v. United States Postal Service, PSBCA No. 6583 and Patricia Joy Sasnett v. United States Postal Service, PSBCA No. 6584, 17-1 BCA ¶ 36,692.  That decision addressed three issues – the propriety of contract terminations, the application of a trip cancellation clause, and the termination notice.¹  The Board ruled in favor of the Postal Service on the contract terminations and the trip cancellation clause.  In so doing, we denied Appellants’ claims seeking a combined $1,022,959.  The Board granted the appeals regarding notice, finding that Appellants were due a combined $7,099 (plus interest).  Appellants base their EAJA applications on the limited relief they obtained involving the notice issue but applied for all attorney fees and expenses incurred in the entire litigation.
EAJA eligibility for an award of attorney fees and expenses requires that an applicant:
(1)    be the prevailing party in an eligible proceeding against the United States;
(2)    if a corporation, have not more than five hundred employees and a net worth not more than $7,000,000, or if an individual, have a net worth not more than $2,000,000;
(3)    submit its application within 30 days of a final adjudication disposition;
(4)    in the application, show that it has met these requirements, state the amount sought, and include an itemized statement of costs and attorney fees; and
(5)    allege that the position of the agency was not substantially justified. 
5 U.S.C. § 504(a)-(b); 39 C.F.R. Part 960; Carranza Trucking Co. v. United States Postal Service, PSBCA No. 6354, 15-1 BCA ¶ 35,994.      
The Postal Service does not contest that Appellants have satisfied the second, third and fourth elements.  The Postal Service challenges the applications on the bases that Appellants were not a prevailing party, and that the Postal Service’s position was substantially justified.  The Postal Service also argues that, if an EAJA award is determined to be appropriate despite its challenges, the award should be limited to 0.7% of the amount sought due to the proportionate relief Appellants realized.
Prevailing party
We held that, by terminating Appellants’ contracts, the Postal Service did not breach those contracts, and we held that Appellants were not entitled to 50% of the contract proceeds under the trip cancellation clauses.  Appellants were not the prevailing party for these issues, which involved most of the efforts expended in the litigation.
A third issue was litigated, however, on which Appellants base their EAJA applications.  Although not separately identified in their claims, Appellants asserted an alternative theory in their complaints that the Postal Service failed to provide the contractually-required period for notice of termination and therefore owed $9,631 in additional compensation ($1,405 for Cook Mail Carriers, and $8,226 for Ms. Sasnett).  This notice issue was fully litigated.  Testimony was presented, the parties briefed the issue,² and the Board analyzed and decided it in the resulting decision.  The issue is distinct from the other issues in the case.
During the post-hearing briefing period, the Postal Service voluntarily paid Appellants $7,099 of the $9,631 sought for insufficient notice.  In our decision, the Board ruled in favor of the Postal Service, holding that it did not owe more than that $7,099.  Specifically, we held that the $937 the Postal Service paid to Cook Mail Carriers represented the correct amount owed.  We also ruled that Ms. Sasnett was entitled to $6,162 compensation while the Postal Service had paid her $6,295.
The Postal Service offers two arguments supporting its position that Appellants should not be considered a prevailing party.  First, the Postal Service argues that it voluntarily paid Appellant for insufficient notice, and that therefore, the Board did not rule in favor of Appellants in the decision at all.
We disagree with the Postal Service’s position.  Appellants were the prevailing party because they obtained most of the relief they sought in a significant issue that was litigated, and decided, in their favor by the Board.  Our decision therefore included a Board order representing an enforceable judgment on the merits.  This judgment carries “sufficient judicial imprimatur to materially alter the legal relationship of the parties,” Rice Servs., Ltd. v. United States, 405 F.3d 1017, 1026 (Fed. Cir. 2005), overcoming the Postal Service’s defense.
Second, the Postal Service emphasizes that Appellants recovered less than 1% of the amount in controversy (0.7% specifically), and therefore should not be considered a prevailing party in the overall context of the litigation.  To qualify as a prevailing party under EAJA, the applicant must “succeed on any significant issue in litigation which achieves some of the benefit the parties sought in bringing suit.”  Hensley v. Eckerhart, 461 U.S. 424, 433 (1983).  The Postal Service opposed payment for the termination notice issue throughout this litigation, and did so until post-hearing briefing.  Although small in comparison with the other issues litigated, we believe that inadequate notice, as a stand-alone issue, qualifies as significant within the meaning of EAJA, and the litigation achieved some of the benefit related to that issue that Appellants sought in bringing suit.  See The Dalles Irrigation Dist. v. United States, 91 Fed. Cl. 689, 704 (2010) (prevailing on one of numerous claims and being awarded 2% of amount in controversy qualified plaintiff for EAJA award because attorney fees are not limited to the dollars awarded); The Little Susitna Co., PSBCA No. 2216, et al., 93-1 BCA ¶ 25,497 at 127,004 (appellant who recovered less than $5,000, achieving less than 2.5% of amount claimed, was prevailing party).
Therefore, the relative degree of recovery Appellants realized is better addressed by reducing the EAJA fees sought rather than by denying them entirely.
Substantial justification
“When a party has prevailed in litigation against the government, the government bears the burden of establishing that its position was substantially justified.”  Doty v. United States, 71 F.3d 384, 385 (Fed. Cir. 1995).  Showing a colorable legal basis for its position is not alone sufficient to show substantial justification under EAJA.  See Gavette v. OPM, 808 F.2d 1456 (Fed. Cir. 1986) (en banc).
In attempting to satisfy this burden, the Postal Service first argues that the notice issue, which was not specifically identified in Appellant’s claims, arose “late in the litigation process.”  However, Appellants raised the issue specifically in their complaints and litigated it throughout.  Because Appellants have not sought EAJA fees for any period before this litigation began, the Postal Service’s argument provides no defense.
Second, the Postal Service argues that its liability for the costs of additional notice was unsettled in the law and that it therefore was substantially justified in opposing payment.  Specifically, the Postal Service asserts that its reliance on notice having been effective when emails were sent to Appellants provided a substantial justification for its position that it had provided the full period of notice required by the contracts.  It argues that its voluntary payment, made for strategic reasons, should not affect its substantial justification in relying on an unsettled area of the law.³
In the underlying decision, we found that Appellants received the mailed termination notices on March 14 and 15, 2014, and that they were not aware that the contracts were being terminated until receipt (Findings of Fact 13, 20).  It is well-settled that (absent an agreement to the contrary) a termination notice is not effective until receipt by the contractor.  See, e.g., England v. The Swanson Group, Inc., 353 F.3d 1375, 1378 (Fed. Cir. 2004); Stephen Zucker Package Servs. Plus, PSBCA Nos. 3396-98, 96-2 BCA ¶ 28,282 at 141,202 n. 5; see also Zobe, L.L.C., PSBCA No. 6239, 10-1 BCA ¶ 34,342 at 169,611.  The Postal Service presented no evidence that either Appellant was aware of the notice email before receiving the mailed notifications.  Accordingly, the Postal Service’s position was not substantially justified within the meaning of EAJA.
Award calculations
Having concluded that Appellants are entitled to an EAJA award, we turn to the appropriate amount of that award.  Appellants’ EAJA applications utilize a $150 hourly attorney fee rate starting in 2016.  This rate exceeds the $125 per hour limit.⁴  See 5 U.S.C. § 504(b)(1)(a); 39 C.F.R. § 960.6(b); Coastal, Inc., PSBCA No. 1728, 89-2 BCA ¶ 21,876 at 110,059.  We therefore recalculate the EAJA applications using $125 per hour.  We also reduce the applications by $275 to eliminate an unexplained expense for a court transcript copy because the Board provided the hearing transcripts to the parties, without charge, according to our rules of practice.  39 C.F.R. § 955.25.  For these reasons, we initially reduce the EAJA applications from $23,065.80 to $19,865.
An EAJA award should be limited to the amount of fees that is reasonable in relation to the results obtained where the relief provided represents a portion of the litigation as a whole so as to account for positions on which the applicant did not prevail.  See Hensley, 461 U.S. at 440; Chiu v. United States, 948 F.2d 711, 722 (Fed. Cir. 1991).  Appellants’ EAJA applications do not identify which tasks were associated with the notice issue and are not reduced to account for the vast majority of the case on which they were not a prevailing party.  We agree with the Postal Service that the EAJA applications must be reduced to account for the limited relief awarded.
The Postal Service contends that any recovery should be limited to the mathematical proportion of the case on which Appellants succeeded, which it calculates as 0.7%.  In Hubbard v. United States, 480 F.3d 1327, 1333-34 (Fed. Cir. 2007), the Federal Circuit rejected this argument and required a more nuanced approach.  Applying a nuanced approach to this case, we believe that the level of effort expended to recover for inadequate notice was substantially greater than 0.7%.  See Naekel v. Dept. of Transp., 884 F.2d 1378, 1380 (Fed. Cir. 1989) (allocation of EAJA fees based on the effort actually expended).
We base recovery on our sense of the level of effort expended by Appellants to achieve the relief they obtained.  In consideration of the amount of hearing testimony addressing the notice issue, the amount of briefing addressing it, and the amount of analysis needed in the decision addressing the issue, as well as the limited relative relief achieved, we conclude that a 10% EAJA recovery is appropriate.  Applying that 10% rate to the reduced $19,865 EAJA applications yields $1,987.
However, on the calculation of the costs due for the notice issue, Appellants were not fully successful.  While Appellants sought $9,631, they were entitled to $7,099 ($937 for Cook Mail Carriers and $6,162 for Ms. Sasnett).  We reduce the EAJA award by another 25%, to account for the part of the notice issue for which Appellants did not succeed.  Accordingly, we reduce the remaining $1,987 award by 25%, and award Appellants $1,490 in EAJA fees.

ORDER

The EAJA applications are granted in part.  We award Appellants $1,490.

Gary E. Shapiro
Administrative Judge
Chairman

I concur:
Alan R. Caramella
Administrative Judge
Vice Chairman

I concur:
Diane M. Mego
Administrative Judge
Board Member