Appeal of
BANKS TRUCKING
Under Contract No. HCR 955AR
PSBCA No. 3528

APPEARANCE FOR APPELLANT:
Harry Pascuzzi, Esq.

APPEARANCE FOR RESPONDENT:
Mark Brent Ezersky, Esq.
Robert O’Connell, Esq.

OPINION OF THE BOARD ON EAJA APPLICATION

            Appellant, Banks Trucking, has filed a timely application under the Equal Access to Justice Act (“EAJA”), 5 U.S.C. §504, for fees and other expenses incurred in connection with its successful challenge to the default termination of its transportation contract with Respondent, United States Postal Service.  Banks Trucking, PSBCA No. 3528, 96-1 BCA ¶ 28,132.  In its application, Appellant sought recovery of $42,193.17, which included claimed fees and expenses through the filing of the application.  The claim has been increased by $1,725, the claimed cost of preparing Appellant’s reply to Respondent’s opposition to the EAJA application, and by $3,990 for 28.5 hours shown on the original bills from the attorney to Appellant but for which Appellant was not charged.  The fee request was reduced by $450 for three hours of attorney time included in the original application that was incurred in connection with another appeal.  The resulting total of Appellant’s EAJA claim is $47,458.17.

            The elements of Appellant’s application and Respondent’s objections will be addressed below.

Appellant’s Eligibility

            Appellant was the prevailing party in the appeal and has demonstrated that its net worth and number of employees are below the eligibility limits.  39 C.F.R. §960.4.

Was Respondent’s Position Substantially Justified?

            Respondent argues that Appellant’s application should be denied entirely since, even though the decision in the appeal was adverse, Respondent’s position was substantially justified.  Appellant argues that Respondent’s position was not substantially justified.

            An EAJA award will not be made if Respondent demonstrates that its overall position, i.e. its termination of Appellant’s contract as well as its litigation position, had a reasonable basis in law and fact.  39 C.F.R. §960.5(a); see Pierce v. Underwood, 487 U.S. 552, 565 (1988); Chiu v. United States, 948 F.2d 711, 715 (Fed. Cir. 1991); Bula Forge, Inc., PSBCA No. 1490, 89-1 BCA ¶ 21,380 at 107,759. The facts of this appeal are set forth in detail in our decision on the merits and will be presented only briefly here for purposes of determining whether Respondent’s actions were substantially justified.

            Appellant was awarded a contract to provide transportation services to an important customer of the Postal Service.  Unfortunately, unknown to Appellant, the contract it bid on and was awarded did not describe or require Appellant to provide the service the customer demanded.  From the beginning of contract performance, Appellant was subject to intense pressure from the customer and local postal officials to provide what the customer wanted notwithstanding the written requirements of the contract.  Appellant performed as the customer demanded, even though doing so increased its costs, and sought a contract modification from the contracting officer that would recognize the service actually required and compensate Appellant for it.  Appellant, the local postmaster and the customer tried repeatedly over seven months to get the contract amended, but no amendment was issued.

            Appellant’s principals became increasingly frustrated that no one responded to their complaints that a modification was necessary.  Eventually, Appellant began performing the contract exactly as written in order to get the matter resolved.  The customer and the local postmaster were upset, and there was a heated argument between Appellant’s principal and the local postmaster on the customer’s dock.  Two days later, the contracting officer terminated the contract for default based on the argument.  In our original opinion, we concluded that Appellant’s conduct did not warrant termination.  Respondent’s failure to negotiate in good faith for a modification to Appellant’s contract and the subsequent unjustified termination cannot be said to have had a reasonable basis in fact and law.  See The Little Susitna Co., PSBCA Nos. 2216, 2333, 2511, 93-1 BCA ¶ 25,497; M.E. McGeary Co., ASBCA No. 31700, 87-3 BCA ¶ 20,185.

            Respondent’s position was not substantially justified.  Therefore, and because there are no circumstances that would make an award against Respondent unjust, 39 C.F.R. §960.5(b), Appellant is entitled to an award of reasonable attorney fees and expenses.

Attorney Fees and Expenses Claimed

            Appellant’s total claim for attorney fees and expenses is $47,458.17.  The attorney fees portion seeks recovery for 191.50 hours billed at $140 per hour, 8 hours billed at $150 per hour^[1], and 35.75 hours billed at $125 per hour, for total attorney fees of $32,508.75.  Appellant also claimed $3,255 for 65.1 hours of paralegal time at $50 per hour, the rate at which Appellant was billed for the service, $1,461 for 73.05 hours devoted to word processing, for which Appellant was billed by its attorney at the rate of $20 per hour, costs and expenses associated with the litigation in the amount of $4,106.38, and $2,167.04 in interest charged Appellant by its attorney for Appellant’s late payment of the attorney’s bill.  Finally, in its reply to Respondent’s opposition to the fee application, Appellant added $3,990 to its request, representing 28.5 hours of attorney time devoted to this appeal for which Appellant’s attorney did not bill Appellant.

            In support of its EAJA claim, Appellant submitted copies of the detailed monthly invoices Appellant’s attorney provided to Appellant.  The invoices identify the person who performed the work, describe briefly the nature of the work and state the date the work was performed and the number of hours spent.  In counsel’s affidavit, the capacity and billing rates of each individual are described.  This is adequate for the Board to assess entitlement to fees.  See Community Heating & Plumbing v. Garrett, 2 F.3d 1143, 1146 (Fed. Cir. 1993).

Maximum rate allowed for attorney fees

            Respondent argues that Appellant may recover for attorney fees at no more than $75 per hour, the rate stated in 39 C.F.R. §960.7(b) to be the maximum allowable rate for EAJA awards by the Board.  Appellant has supported its request for higher hourly rates with evidence that the cost of living in the attorney’s area has increased since the implementation of EAJA and establishment of the $75 per hour fee, and that, under the cost-of-living escalation provisions of EAJA, the Board should allow the higher rates.

            Although agencies may recognize changes to the cost of living and increase the hourly rate to be allowed for attorney fees, the Postal Service has not done so.  The Board is, therefore, limited in its awards to $75 per hour, regardless of the actual rate incurred by Appellant.  See The Little Susitna Company, PSBCA Nos. 2216, 2333, 2511, 93-1 BCA ¶ 25,497 at 127,006; Coastal, Inc., PSBCA No. 1728, 89-2 BCA ¶ 21,876 at 110,059 recon. denied, 89-3 BCA ¶ 22,159.

            Appellant has filed with the General Counsel of the Postal Service a Request for Rule Making Proceeding to increase the maximum rate for attorney fees as authorized by 39 C.F.R. §960.7.  The General Counsel has authority to consider such requests for the Postal Service, and the Board will take no action with respect to Appellant’s Request for Rule Making, a copy of which Appellant filed with its fee request.^[2]

Fees Incurred Before the Final Decision

            Respondent argues that Appellant is not entitled to recover attorney fees and expenses it incurred before the contracting officer issued his final decision terminating the contract.  In its reply to Respondent’s opposition, Appellant argues that the contracting officer’s intractability over the seven months of the contract converted the parties to an adversarial posture long before the final decision and that, therefore, fees and expenses incurred before the termination should be recoverable.

            Levernier Construction, Inc. v. United States, 947 F.2d 497 (Fed. Cir. 1991), makes it clear that “at its earliest, EAJA coverage may begin after the decision of and in pursuit of an appeal from the decision of a contracting officer.”  Levernier Constr., Inc. v. United States, 947 F.2d at 502.  Thus, attorney fees and expenses incurred for services provided before the final decision were not expended in connection with this appeal and are not recoverable.  Id.; The Little Susitna Co., PSBCA Nos. 2216, 2333, 2511, 93-1 BCA ¶ 25,497; William G. Barnes & Son Co., PSBCA No. 2432, 96-1 BCA ¶ 28,066; 5 U.S.C. §504(a)(1) and (b)(1)(C)(ii).

            Even though the termination letter was not issued until September 23, 1993, the contracting officer orally terminated the contract on September 3.  From September 3, 1993, notwithstanding the absence of a written final decision, Appellant’s focus was on the adversary adjudication to obtain relief from the termination, and, therefore, September 3, 1993, will start the clock for recoverable fees and expenses.  Cf. Berkeley Constr. Co., VABCA No. 1962E, 88-3 BCA ¶ 20,941 at 105,812.

            Therefore, Appellant may not recover for the 20 hours of attorney time and $56.97 in expenses shown on the invoices as having been incurred before September 3, 1993.

Work on Settled Claim

            Respondent argues that during the period covered by the EAJA request, Appellant’s attorney was involved in the settlement of another claim Appellant had against Respondent and that Appellant may not recover for the time spent by the attorney on a different matter.  Appellant acknowledged that the application included time spent by its attorney on settling PSBCA No. 3693, but contends the amount of time spent on that matter was no more than three hours.  Appellant has conceded that the fee request should be reduced by $450, representing three hours of attorney time.

            Fees and expenses incurred in prosecuting a different claim were not incurred “in connection with” PSBCA No. 3528, the case at hand, and are not compensable.  39 U.S.C. §504(a)(1).  Three hours of the attorney’s time appears reasonable for work on the other appeal, considering the apparently simple and quick settlement process in PSBCA No. 3693 and the relatively small amount of money involved.  Therefore, the attorney fee claim is reduced by $450 and three hours.  This leaves a total of 188.75 attorney hours expended in connection with this appeal from September 3, 1993, up to, but not including, preparation of the fee application.

Paralegal fees

            Appellant seeks to recover for 65.1 hours of paralegal time devoted to litigation of this appeal at the rate at which it was billed for such services by its attorney, $50 per hour.  Respondent does not dispute Appellant’s entitlement to recover for time spent by paralegals or the number of such hours claimed to have been expended in this appeal.  However, Respondent argues that paralegal fees are allowed only at the actual rate paid to the paralegals, not at the $50 per hour rate at which Appellant was billed.

            Paralegal fees have been held to be recoverable under EAJA, see Levernier Constr., Inc. v. United States, 947 F.2d 497, 503 (Fed. Cir. 1991); Oliveira v. United States, 827 F.2d 735, 744 (Fed. Cir. 1987); Coastal, Inc., PSBCA No. 1728, 89-2 BCA ¶ 21,876 recon. denied, 89-3 BCA ¶ 22,159.  We have allowed paralegal fees at the actual cost of the paralegal services, Coastal, Inc., PSBCA No. 1728, 89-2 BCA ¶ 21,876 recon. denied, 89-3 BCA ¶ 22,159, as have a number of other boards, e.g. Walsky Constr. Co., ASBCA No. 41541, 95-2 BCA ¶ 27,889; Gracon Corp., IBCA No. 2582-F, 90-1 BCA ¶ 22,550; Francis Paine Logging, AGBCA 91-156-10, 92-3 BCA ¶ 25,043; E.W. Eldridge, Inc., ENGBCA 5269-F, 92-1 BCA ¶ 24,626.

            Consequently, Appellant’s recovery for the time spent by paralegals on its appeal is limited to the cost of that time to the attorney.  The paralegal time expended after September 3, 1993, was 65.1 hours.  Of those hours, 37.90 were expended by a paralegal earning $12.69 per hour, 1.20 hours by a paralegal earning $10.00 per hour and 26.00 hours by a paralegal earning $10.63 per hour.  Appellant argues that the “cost” to its attorney of the paralegals is $40.00 per hour when considering, in addition to the actual salary paid the paralegal, benefits, taxes, overhead for space, law books, etc.  It appears the $40 rate urged by Appellant was determined by backing out the attorney’s customary profit rate from the $50 per hour billing rate, and Appellant has provided no breakdown of the costs it contends are attributable to the paralegal services.  This information is insufficient to justify an award of fees for paralegals at the rate of $40 per hour, but it is apparent that the “cost” to the attorney is more than the actual salary of his employee.  Benefits paid to or on behalf of the paralegals as well as demonstrated indirect costs attributable to the paralegals’ services are costs to the attorney.  M. Bianchi of California, ASBCA Nos. 26362, et al., 91-1 BCA ¶ 23,445 at 117,639.  Under a jury verdict approach, paralegal services will be allowed at the rate of $20 per hour.

            The total allowed for the 65.1 paralegal hours, therefore, is $1,302.

Word Processing

            Appellant claims entitlement to $1,461 for 73.05 hours of word processing services related to the appeal.  Appellant was billed separately at the rate of $20 per hour for word processing.  Although this element of the fee application was not challenged by Respondent, such fees are not recoverable.  We do not find that separate billing for word processing is customary, and we agree with the decisions that have found secretarial services, such as word processing, to be a part of overhead that must be considered included in the attorney’s hourly rate.  E.g. Hirschey v. F.E.R.C., 777 F.2d 1, 6 (D.C. Cir. 1985); Security Services, Inc. v. General Services Administration, GSBCA No. 12390-C(11052), 94-1 BCA ¶ 26,499 at 131,901; Danrenke Corp., VABCA Nos. 3601E et al., 94-1 BCA ¶ 26,504 at 131,930, and cases cited therein; PetroElec Constr. Co., ASBCA Nos. 32999, et al., 87-3 BCA ¶ 20,111 at 101,845.  Word processing hours are not recoverable.

Miscellaneous Expenses

            Miscellaneous expenses in the amount of $4,106.38 claimed by Appellant have not been challenged by Respondent.  Those expenses incurred after September 3, 1993, were, to the extent noted below, reasonable in amount, necessary to prosecution of this appeal and chargeable to Appellant in accordance with local practice.  See Oliveira v. United States, 827 F.2d 735, 744 (Fed. Cir. 1987).  Therefore, $391.08 for copying, $101.83^[3] for long distance, $534.37 for on-line computer research, $2,435.70 for deposition transcripts, $168.07 for postage and delivery charges, $27.00 for facsimile transmission, $175.80 for attorney travel expenses for the hearing, $211.06 for subpoena and document production fees, and $4.50 for parking fees, for a total of $4,049.41, are all recoverable.  See International Woodworkers of America v. Donovan, 792 F.2d 762, 767 (9th Cir. 1986) (reasonable travel expenses of attorney); Coastal, Inc., PSBCA No. 1728, 89-2 BCA ¶ 21,876 at 110,059 recon. denied, 89-3 BCA ¶ 22,159 (long distance, photocopies and postage); American Federal Contractors, Inc., PSBCA No. 1359, 88-2 BCA ¶ 20,526 (duplicating, transcript, overnight delivery, transportation, telephone, parking); Walsky Constr. Co., ASBCA No. 41541, 95-2 BCA ¶ 27,889 (facsimile transmission); Industrial Refrigeration Service Corp., VABCA No. 2532E, 93-1 BCA ¶ 25,291 (computer assisted research, copying, messenger, postage, long distance, parking during hearing); Spectrum Leasing Corp. v. General Services Administration, GSBCA Nos. 10902-C(7347) et al., 93-1 BCA ¶ 25,317 (attorney’s reasonable travel expenses, transcripts); R&R Enterprises, IBCA No. 2664-F, 90-3 BCA ¶ 23,039 (attorney parking fees, mailing costs, telephone, copying, postage); Northwest Piping, Inc., IBCA No. 2642-F, 90-1 BCA ¶ 22,446 (on line computer research); Consolidated Technologies, Inc., ASBCA No. 33560R, 90-1 BCA ¶ 22,603 (copying, Express Mail, courier, postage).  Appellant may recover $4,049.41 for the miscellaneous expenses.

Interest

            Appellant apparently fell behind in making the payments required of it by the arrangement with its attorney.  A number of the attorney invoices to Appellant include an entry for interest on the unpaid balance, and interest owed or paid to the attorney totaling $2,167.04 has been included in the EAJA claim.  Respondent objects to recovery for interest.

            The interest charges were not incurred “in connection with” the prosecution of this appeal within the meaning of EAJA, see 5 U.S.C. §504(a)(1), and, furthermore, the Equal Access to Justice Act does not contain the required unequivocal mandate necessary to impose liability on Respondent for an award in the nature of interest, see Chiu v. United States, 948 F.2d 711, 719-721 (Fed. Cir. 1991), citing Library of Congress v. Shaw, 478 U.S. 310, 318 (1986).  Therefore, the interest is not recoverable.  Cf. International Woodworkers of America v. Donovan, 792 F.2d at 766; D.E.W., Inc., ASBCA No. 42914, 92-1 BCA ¶ 24,540.

Unbilled Legal Services

            The records submitted in support of Appellant’s EAJA claim reflect 27.25 hours of attorney services provided in connection with this appeal after September 3, 1993, for which the attorney did not bill Appellant.  In its original EAJA claim, Appellant did not seek recovery for those hours, but in its reply to Respondent’s opposition to the fee request, at page 12, Appellant included a charge for unbilled hours at $140 per hour.

            In support of its claim, Appellant relies on §960.6 of the Postal Service rules applicable to EAJA claims, 39 C.F.R. Part 960, which provides, “Awards will be based on rates customarily charged by persons engaged in the business of acting as attorneys, agents and expert witnesses, even if the services were made available without charge or at a reduced rate to the applicant.”  This standard is consistent with statements included in the legislative history for EAJA as originally enacted:

“In general, consistent with the above limitations, the computation of attorney fees should be based on prevailing market rates without reference to the fee arrangements between the attorney and client.  The fact that attorneys may be providing services at salaries or hourly rates below the standard commercial rates which attorneys might normally receive for services rendered is not relevant to the computation of compensation under the Act.  In short, the award of fees is to be determined according to general professional standards.”   H.R. Rep. No. 1418, 96th Cong., 2d Sess. 5-6, reprinted in 1980 U.S.C.C.A.N. 4984, 4994.

In Consolidated Technologies, ASBCA No. 33560R, 90-1 BCA ¶ 22,603, the applicant was awarded EAJA attorney fees of $9,798.95, determined by multiplying the number of hours expended by $75, even though the applicant had a contingency fee arrangement with its attorney under which the attorney would have been entitled to only $2,009.97.  Consolidated Technologies, ASBCA No. 33560R, 90-1 BCA ¶ 22,603 at 113,428, citing Margaret Howard d/b/a River City Van & Storage, ASBCA Nos. 28648, 29097, 88-3 BCA ¶ 21,040.

            In American Federal Contractors, Inc., PSBCA No. 1359, 88-2 BCA ¶ 20,526, we excluded from the calculation of fees allowable under EAJA, attorney hours for which the client was not billed, citing Hensley v. Eckerhart, 461 U.S. 424, 434 (1983), and Input Output Computer Services, Inc., GSBCA Nos. 8435 (7090), 8436 (7091), 87-3 BCA ¶ 20,073.  Hensley noted that attorneys must exclude from their fee requests hours that were excessive, redundant or otherwise unnecessary and concluded that hours not billed because they were not “reasonably expended” in connection with prosecution of the appeal could not be recovered.  Hensley v. Eckerhart, 461 U.S. at 434.  Thus, American Federal Contractors, Inc., bars an EAJA recovery of attorney fees not billed because the fees were not properly chargeable to the client, and 39 C.F.R. §960.6(a), relied on by Appellant, does not require a contrary result.

            It is not apparent why Appellant’s attorney did not charge for the 27.25 hours identified as “NO CHARGE” on the invoices, and Appellant has offered no explanation.  Without an explanation of the decision not to charge for part of the attorney’s time, we cannot determine that the hours were “reasonably expended”, and Appellant may not recover for those hours.

Summary of Allowable Fees and Expenses

            For the fees and expenses incurred in connection with the appeal up to the filing of the EAJA application, the following amounts are allowed:

            1.  Attorney fees:  188.75 hours at the rate of $75 per hour, for a total of $14,156.25.

            2.  Paralegals:  $1,302.00.

            3.  Miscellaneous expenses:  $4,049.41.

            4.  Total:  $19,507.66.

EAJA Application Fees

            Appellant claims 14.75 attorney hours for preparation of the original EAJA application and 13 attorney hours for preparation of the answer to Respondent’s opposition.  The fees incurred in connection with the original application are fully recoverable, American Federal Contractors, Inc., PSBCA No. 1359, 88-2 BCA ¶ 20,526, The Little Susitna company, PSBCA Nos. 2216, 2333, 2511, 93-1 BCA ¶ 25,497 at 127,006, however, the fees incurred in replying to Respondent’s objections to the application must be discounted to reflect the success of Appellant’s reply.  See Commissioner v. Jean, 496 U.S. 154, 163 n. 10 (1990);  Chiu v. United States, 948 F.2d 711, 722 (Fed. Cir. 1991); Nello Constr. Co., PSBCA No. 3075, 93-1 BCA ¶ 25,495 at 127,000.

            In its opposition to Appellant’s EAJA request, Respondent objected to the award of pre-final decision fees and expenses, fees associated with the settled claim, attorney fees in excess of $75 per hour, interest on late payments to the attorney and paralegal fees in excess of the actual rate paid the paralegals.  Appellant’s reply to Respondent’s opposition was not successful in persuading the Board that Appellant was entitled to recover these fees and expenses in full notwithstanding Respondent’s objections.  Also, Appellant did not convince the Board that it was entitled to recover for hours not billed by Appellant’s attorney, a claim first raised in Appellant’s reply.  Therefore, Appellant may not recover the attorney fees associated with addressing those issues in its reply.  Appellant’s only success in its reply was to persuade the Board that Respondent’s position regarding the merits of the appeal had not been substantially justified, thus providing the basis for an EAJA award.  That effort appears to comprise about 25 per cent of the reply, and, accordingly, we will allow that percentage of the fees associated with the reply.

            Allowing 14.75 hours at the $75 per hour rate for the original application results in an award of fees in the amount of $1,106.25.  Allowing 3.25 hours (25% of 13 hours for the reply) at the $75 rate results in an award of $243.75 for the reply, for total attorney fees related to the fee application of $1,350.

Conclusion

            Adding the allowable fees for the EAJA application, $1,350, to the total for the remainder of the litigation, $19,507.66, results in total allowable attorney fees and expenses of $20,857.66.  Appellant’s application is granted in that amount, and is otherwise denied.

Norman D. Menegat
Administrative Judge
Board Member

I concur:
Administrative Judge
Chairman

I concur
James D. Finn, Jr.
Administrative Judge
Vice Chairman

^[1]  Appellant originally claimed eleven hours at $150 per hour but subsequently reduced its claim by three hours and $450 for time its attorney spent on settling a different appeal.

^[2]  The Equal Access to Justice Act has been amended to raise the maximum allowable rate for attorney fees to $125 per hour, but the increase applies only to actions commenced after the date the amendment was enacted, March 29, 1996.  Contract with America Act, Pub. L. 104-121, §§231, 233, 110 Stat. 847, 862-864 (1996).

^[3]  The invoice for September 1993 included a total of $43.00 of long distance charges, with no indication of the dates on which the charges were incurred.  By applying the ratio of the attorney time for telephone calls after September 3 to the total for the month (3.75 (hours incurred after September 3)/4.5 (total hours of attorney time reflected for telephone calls)), we have reduced the charge to $35.83 for the allowable, post-September 3 long distance charges for that month.