In the United States Court of Federal Claims

No. 11-453C 

(Filed: December 7, 2015) 

 

**************************************** * 

Claim for Overhead and Profit as a 

Mark-up on Recovery of Attorneys’ 

Fees; Start Date for Running of

Interest on Attorneys’ Fees and

Expenses; Proposed Change in 

Method for Determining Attorneys’ 

Fees. 

SUFI NETWORK SERVICES, INC., * 

* 

* 

 Plaintiff, * 

* 

 v. * 

* 

THE UNITED STATES, * 

* 

 Defendant. * 

* 

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Frederick W. Claybrook, Jr., with whom was Brian T. McLaughlin, Crowell & Moring 

LLP, Washington, D.C., for Plaintiff. 

Douglas T. Hoffman, with whom were Benjamin C. Mizer, Principal Deputy Assistant 

Attorney General, Robert E. Kirschman, Jr., Director, and Steven J. Gillingham, Assistant 

Director, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, 

Washington, D.C., for Defendant. 

OPINION AND ORDER 

WHEELER, Judge. 

 This case is before the Court on remand from the U.S. Court of Appeals for the 

Federal Circuit. SUFI Network Servs., Inc. v. United States, 785 F.3d 585 (Fed. Cir. 2015). 

In the decision reviewed on appeal, this Court had awarded attorneys’ fees to SUFI with 

interest, but had denied SUFI’s request for overhead and profit on attorneys’ fees. SUFI 

Network Servs., Inc. v. United States, 113 Fed. Cl. 140 (2013). The Federal Circuit 

affirmed this Court’s award to SUFI of $697,702.50 in attorneys’ fees and $25,486.81 in 

expenses, but vacated and remanded this Court’s ruling with respect to interest, overhead, 

and profit. SUFI, 785 F.3d at 595. The parties have briefed these issues on remand. Oral 

argument is unnecessary. 
2 

 In considering SUFI’s cross-appeal for recovery of overhead and profit, the Federal 

Circuit observed that “[u]nder applicable common law, damages for breach of contract 

should place the wronged party in as good a position as it would have been had the 

breaching party fully performed.” Id. at 594 (citing Mass. Bay Transp. Auth. v. United 

States, 129 F.3d 1226, 1232 (Fed. Cir. 1997)). The Federal Circuit concluded that “we 

vacate the trial court’s denial of overhead and profit and remand with instructions that the 

trial court apply law consistent with this opinion.” Id. at 595. The Federal Circuit thus left 

it to this Court to determine, based upon the common law of damages, whether and to what 

extent SUFI should recover overhead and profit on its attorneys’ fees claim.1

Discussion 

 This case is part of a much larger series of administrative appeals and breach of 

contract actions spanning ten years of litigation, in which there have been thirteen decisions 

from the Armed Services Board of Contract Appeals (“ASBCA”), five decisions from this 

Court, and two appeals to the Federal Circuit.2

 One additional appeal concerning the 

finality of the ASBCA’s February 3, 2015 decision on the merits is still pending before the 

Federal Circuit. SUFI CFC V, 122 Fed. Cl. 257 (2015), appeal filed, No. 11-804 (Sept. 

24, 2015). The overall dispute stems from a planned fifteen-year contract to provide longdistance telephone services in the lodging guest rooms on Air Force bases in Germany. 

The contracting parties were SUFI and the Air Force Non-Appropriated Funds Purchasing 

Office (“Air Force”). The contract was cut short by the Air Force’s material breaches of 

contract. 

 

1

 SUFI’s assertion that the Federal Circuit mandated the award of overhead and profit on attorneys’ fees to 

SUFI is incorrect. See Pl.’s Oct. 19, 2015 Br. at 1 (citing SUFI Network Servs., Inc. v. United States, 785 

F.3d 585, 594-95 (Fed. Cir. 2015)). The Federal Circuit’s mandate simply requires this Court to review the 

issue again by applying principles of common law damages instead of the Federal Acquisition Regulation. 

2 The ASBCA’s thirteen reported opinions are referred to as “SUFI ASBCA I” through “SUFI ASBCA 

XIII”. Likewise, the previous opinions in this case, No. 11-453, and its related case, No. 11-804C, are 

referred to, in chronological order, as “SUFI CFC I” through “SUFI CFC V.” SUFI ASBCA I, ASBCA 

No. 54503, 04–1 BCA ¶ 32606 (Apr. 22, 2004); SUFI ASBCA II, ASBCA No. 54503, 04–2 BCA ¶ 32714 

(Aug. 17, 2004); SUFI ASBCA III, ASBCA No. 54503, 04–2 BCA ¶ 32788 (Nov. 1, 2004); SUFI ASBCA 

IV, ASBCA No. 55306, 06–2 BCA ¶ 33444 (Nov. 8, 2006); SUFI ASBCA V, ASBCA No. 55306, 07–1 

BCA ¶ 33485 (Feb. 7, 2007); SUFI ASBCA VI, ASBCA No. 55306, 07–1 BCA ¶ 33535 (Mar. 21, 2007); 

SUFI ASBCA VII, ASBCA No. 55948, 08–1 BCA ¶ 33766 (Jan. 9, 2008); SUFI ASBCA VIII, ASBCA 

No. 55306, 09–1 BCA ¶ 34018 (Nov. 21, 2008); SUFI ASBCA IX, ASBCA No. 55306, 09–2 BCA ¶ 34201 

(Jul. 15, 2009); SUFI ASBCA X, ASBCA No. 55306, 10–1 BCA ¶ 34327 (Dec. 14, 2009); SUFI ASBCA 

XI, ASBCA No. 55306, 10–1 BCA ¶ 34415 (Apr. 5, 2010); SUFI ASBCA XII, ASBCA No. 55306, 15-1 

BCA ¶ 35,878 (Fed. 2, 2015); SUFI ASBCA XIII, ASBCA No. 55306, 15-1 BCA ¶ 35,992 (May 20, 2015); 

SUFI CFC I, 102 Fed. Cl. 656 (2012); SUFI CFC II, 105 Fed. Cl. 184 (2012); SUFI CFC III, 108 Fed. Cl. 

287 (2012), aff’d in part, rev’d in part, 755 F.3d 1305 (2014); SUFI CFC IV, 113 Fed. Cl. 140 (2013), aff’d 

in part, vacated in part, 785 F.3d 585 (2015); SUFI CFC V, 122 Fed. Cl. 257 (2015), appeal filed, No. 11-

804 (Sept. 24, 2015); SUFI Network Servs., Inc. v. United States, 755 F.3d 1305 (Fed. Cir. 2014); SUFI 

Network Servs., Inc. v. United States, 785 F.3d 585 (Fed. Cir. 2015).
3 

A. Overhead and Profit on Attorneys’ Fees 

Cumulatively, SUFI has succeeded in its quest to be compensated for the Air 

Force’s breaches, including the recovery of lost profits and overhead caused by the Air 

Force’s conduct. In the breach damages award exceeding $110 million, SUFI established 

its entitlement to more than $58 million in lost profits. SUFI also received overhead 

compensation relating to its performance of extra work under the contract. The issue now 

remaining is whether SUFI should receive additional profit and overhead as a mark-up on 

the attorneys’ fees of its outside law firm, Crowell & Moring. 

 SUFI contends that it should receive a 25 percent profit on Crowell & Moring’s 

attorneys’ fees, based upon two provisions included in Modification 007 to the contract, 

dated February 18, 2000. These two provisions state as follows: 

3.11.1 “Additional Work Requested” 

Additional work requested by the LFM [Lodging Facilities 

Manager] not specified in the contract will be the responsibility 

of the Lodging operation to fund. This pertains to items such 

as office moves, additional phones, and other requests not 

covered under this contract. The LFM must submit a request 

for proposal to the Contractor specifying the work to be 

accomplished and the time frame required. The Contractor 

will respond within 15 duty days and provide a technical 

proposal and cost proposal of no more than 25% over cost to 

the Lodging Manager and [Air Force] at no additional charge 

to the government. 

3.11.2 “Facility Renovations” 

The LFM must notify the contractor before an existing building 

is scheduled for renovation so the contractor may remove any 

existing telephones, frames, and other equipment. The LFM 

must notify the contractor 60 days in advance for a major 

renovation (i.e. and [sic] entire building) and 30 days in 

advance for a minor renovation (i.e., individual rooms or 

floors. Contractor shall submit a proposal of no more than 25% 

over cost to LFM and [Air Force] in three separate areas: 1) 

removal of equipment prior to renovation; 2) cost of 

reinstalling the system temporarily based on LFM 

requirements during renovation if so desired; 3) and full 

reinstallation of phone system when the building is ready again 
4 

for occupancy. [Air Force] and SUFI Network Service will 

work together on a fair and reasonable cost plus price that is 

agreeable to both parties prior to the start of any work. 

(PX 58 at 1-2.) 

These contract provisions on their face do not apply to SUFI’s claim for recovery 

of attorneys’ fees, and would not justify a mark-up on attorneys’ fees. Neither section 

3.11.1 nor 3.11.2 references anything about attorneys’ fees or legal costs. Based upon the 

plain language of the clauses, they apply to “office moves, additional phones, and other 

requests [from the government] not covered under this contract,” as stated in clause 3.11.1, 

and to “major” and “minor” renovations requiring the removal of “existing telephones, 

frames, and other equipment,” as stated in clause 3.11.2. 

Logic would support a distinction between contract performance work managed by 

SUFI under sections 3.11.1 and 3.11.2, and legal work managed and performed by SUFI’s 

outside law firm. A negotiated profit and overhead rate would be entirely appropriate for 

SUFI’s contract work, and indeed SUFI received this compensation as a mark-up on its 

claims. However, the Court is not aware of any contractual basis to grant SUFI a 25 

percent mark-up on legal work performed by Crowell & Moring. Such a mark-up would 

have the effect of increasing Crowell & Moring’s hourly billing rates by 25 percent for no 

apparent reason. SUFI does not cite any other contract provision supporting its claim for 

overhead and profit on fees. 

Lacking any contractual basis for recovery, the Court will turn to the elements for 

establishing recovery under the common law of damages. Common law breach of contract 

damages “are recoverable where: (1) the damages were reasonably foreseeable by the 

breaching party at the time of contracting; (2) the breach is a substantial causal factor in 

the damages; and (3) the damages are shown with reasonable certainty.” Sys. Fuels, Inc. 

v. United States, 666 F.3d 1306, 1311 (Fed. Cir. 2012) (citing Ind. Mich. Power Co. v. 

United States, 422 F.3d 1369, 1373 (Fed. Cir. 2005)). Examining SUFI’s claim for a 

profit and overhead mark-up on Crowell & Moring’s attorneys’ fees, the Court finds that 

SUFI does not satisfy any of these three criteria. 

First, looking to the foreseeability that a breaching party would expect to be 

charged for profit and overhead on top of attorneys’ fees, the Court does not see any 

circumstances under which such a mark-up would be foreseeable. Profit normally is 

viewed as a reward for having assumed a business risk of some kind. See Howard O. 

Hunter, Modern Law of Contracts § 14:10 (2015). Here, SUFI did not assume any risk in 

having an outside law firm prepare a contract claim on a contingent fee basis. If the claim 

were successful, as this one was, SUFI would receive a large sum from the Government, 

and it would owe the law firm an agreed percentage for the law firm’s efforts. If the claim 

was not successful, SUFI presumably would not owe the law firm anything, except 
5 

perhaps for expenses.3 There is no risk to SUFI in this arrangement, and thus no basis for 

the breaching party to believe that SUFI should receive a profit on top of the legal fees. 

Compensation for overhead seemingly would be appropriate if SUFI had played 

some role, and had expended some time and effort, in assisting or overseeing the law 

firm’s claim-preparation tasks. However, there is no evidence that SUFI played any 

significant role in this process. Given the contingent fee arrangement with Crowell & 

Moring, SUFI would have no reason or interest to oversee or manage the law firm’s work. 

This was a case of a novice government contractor turning over the complete claim 

preparation work to an experienced and highly reputable law firm. Where SUFI did not 

add anything material to the claim preparation effort, it is difficult to understand why SUFI 

should receive an overhead component. The Air Force, as the breaching party, would not 

have found it foreseeable to pay SUFI overhead for not doing any material work. 

Second, in assessing whether the breach of contract is a substantial causal factor 

for the claimed damages, the Court is simply unable to identify any damages. As noted 

above, the Court does not see that the Air Force’s breach caused SUFI to lose any profit 

or overhead relating to the law firm’s preparation of the claim. Simply put, the record 

does not support a finding that any profit or overhead damages relating to attorneys’ fees 

even exist. SUFI already has received rulings awarding lost profits and overhead as part 

of its breach of contract claim. Thus, the breach of contract did not cause any additional 

damages. 

Third, in deciding whether SUFI has shown damages with reasonable certainty, the 

only result the Court can reach with reasonable certainty is that no additional overhead 

and profit are warranted. It stands to reason that where the Court is unable to identify any 

damages, those damages cannot be shown with reasonable certainty. The record shows 

that SUFI did not perform any of the work and did not incur any risk justifying a profit. 

Therefore, SUFI has failed to establish any overhead or profit damages with reasonable 

certainty. Further, the Court is not aware of any precedent supporting an overhead and 

profit mark-up on an outside law firm’s fees, and the parties have provided none. 

Accordingly, applying the common law of breach of contract damages, SUFI is not 

entitled to any mark-up for overhead and profit on its law firm’s attorneys’ fees. 

 

3

 SUFI has not produced its contingent fee agreement with Crowell & Moring, ostensibly on attorney-client 

privilege grounds, and thus the agreement is not part of the evidentiary record. The Court cannot determine 

what the terms of the contingent fee agreement may be, a fact that is neither helpful nor hurtful to SUFI’s 

claim. However, if the agreement had been helpful in some respect, presumably SUFI would have produced 

it. 
6 

B. Interest 

The parties disagree on the date when interest should begin to run for attorneys’ 

fees, and whether the application of interest on expenses is still an open issue. Since 

Crowell & Moring handled this matter on a contingent fee basis, SUFI received no legal 

bills and incurred no liability for attorneys’ fees as the work was being performed. Indeed, 

it is doubtful that as of today SUFI has paid anything to Crowell & Moring for attorneys’ 

fees because the Air Force’s obligation for breach damages to SUFI is not final. The 

Government contends and the Court agrees that the earliest date of interest accrual would 

be December 29, 2010, the date that SUFI submitted its claim for fees and expenses to the 

contracting officer. Def.’s Nov. 9, 2015 Br. at 16-17. The date of the claim is the time 

that SUFI formally put the Air Force on notice that payment of a sum certain would be 

expected. Every day thereafter represents a day that SUFI was denied the use of the funds. 

Therefore, starting interest on the date of claim submittal is a reasonable outcome, and 

would be in line with the treatment of interest under the Contract Disputes Act, 41 U.S.C. 

§ 7109(a) (2011). Although this case is not governed by the Contracts Disputes Act, the 

parties likely would accept such a result as being typical in federal procurement law. 

With regard to the running of interest on expenses, the Court agrees with SUFI that 

the Government has waived the right to challenge the Court’s original judgment. Pl.’s 

Oct. 19, 2015 Br. at 4-6. The Government did not appeal this Court’s ruling relating to 

interest on expenses, and therefore the original ruling remains undisturbed. See SUFI IV, 

113 Fed. Cl. 140 (2013). 

C. Proposed Change in Presenting Attorneys’ Fees Claim 

SUFI has recently raised for the first time that its attorneys’ fees calculation should 

be based on the amount it is required to pay Crowell & Moring under the contingent fee 

agreement, rather than using the traditional lodestar method previously presented. Pl.’s 

Oct. 19, 2015 Br. at 7-10. As the Government points out, SUFI presented a traditional 

lodestar method of rates multiplied by hours in its claim to the contracting officer, in its 

complaint, in pretrial filings, during the trial, and on appeal to the Federal Circuit. Def.’s 

Nov. 19, 2015 Br. at 19-28. During the entire trial, and the discovery leading up to trial, 

the parties focused on the reasonableness of the attorneys’ hourly rates and the amount of 

time spent. 

At no time until now has SUFI argued for the recovery of fees based upon its 

contingent fee agreement. This 180 degree reversal has occurred despite the fact that 

SUFI has refused to produce the contingent fee agreement with Crowell & Moring. SUFI 

itself strongly asserted in a February 13, 2012 motion for summary judgment that 

“contingent fee arrangements between the client and the attorney are to be disregarded 

when setting the appropriate fee. . . .” Pl.’s Mot Summ. J. at 11. SUFI relied upon 

Supreme Court precedent that a plaintiff may not recover an amount pursuant to a 
7 

contingent fee agreement. Id. (citing City of Burlington v. Dague, 505 U.S. 557, 562-63 

(1992) (rejecting supplement to lodestar method due to contingent fee arrangement); 

Blanchard v. United States, 489 U.S. 87, 92-95 (1989) (rejecting the capping of a lodestar 

award by a contingent fee arrangement). Similarly, SUFI failed to raise its new fee 

calculation when, in ruling upon cross-motions for summary judgment, this Court 

extensively discussed the fact that SUFI’s contingent fee arrangement did not bar SUFI’s 

recovery of attorneys’ fees based upon hourly rates and time spent. SUFI CFC II, 105 

Fed. Cl. 184, 192-95 (2012). 

The triggering event to SUFI’s change of position is that this Court, and later the 

ASBCA, greatly increased the damages award for the Air Force’s breach, and thus greatly 

increased the amount of the contingent fee that SUFI would pay. Yet, the Court’s damages 

award stems from the SUFI CFC III, decision, issued on November 8, 2012. See 108 Fed. 

Cl. 287 (2012). SUFI could have raised its alternative theory for recovery of attorneys’ 

fees at any time after that date, but it failed to do so. SUFI could have informed the Federal 

Circuit of this new position, but it did not. The Government relied upon SUFI’s lodestar 

method of presentation at every step of this case, and now would have to formulate a brand 

new mode of defense if SUFI were permitted to proceed. Under these circumstances, 

SUFI is equitably estopped from changing its position. Birkelund v. United States, 135 

Ct. Cl. 503, 512-13, 142 F. Supp. 459, 465 (1956). 

Finally, the Court doubts that it has subject matter jurisdiction of SUFI’s 

significantly revised claim under the contingent fee agreement because that claim has 

never been presented to the contracting officer for a final decision. The Court 

acknowledges that some claims may be revised in litigation without having to be presented 

to the contracting officer. See, e.g., J.F. Shea Co. v. United States, 4 Cl. Ct. 46, 54 (1983) 

(permitting revision of claim without submission to contracting officer). In this case, 

however, an attorneys’ fees claim based upon a contingent fee agreement presumably 

would be a drastically larger claim based upon very different legal theories of recovery. 

Using typical contingent fee terms (because SUFI has not produced the actual agreement 

here), a one-third recovery by the law firm could exceed $30 million, as opposed to the 

$697,702.50 awarded by this Court and affirmed by the Federal Circuit. Such a claim 

ought to be submitted initially to the contracting officer. This is not a circumstance where 

plaintiff is correcting an error or adding a new legal basis for recovery. 

For all of the foregoing reasons, the Court will not allow SUFI to change its method 

for recovering attorneys’ fees to the amounts due under the contingent fee agreement. 

Conclusion 

 Within fourteen days, on or before December 21, 2015, the parties shall file a joint 

status report indicating whether any further proceedings are necessary in this case, and if 

so, what those proceedings may entail. 
8 

IT IS SO ORDERED. 

 s/Thomas C. Wheeler 

 THOMAS C. WHEELER 

 Judge