ARMED SERVICES BOARD OF CONTRACTAPPEALS Appeal of--

SUFI Network Services, Inc.
Under Contract No. F41999-96-D-0057
APPEARANCES FOR THE APPELLANT: ) ) ) ) )

APPEARANCES FORTHE GOVERNMENT: ASBCA No. 55306

Frederick W. Claybrook, Jr., Esq. Brian T. McLaughlin, Esq.

Crowell & Moring LLP Washington, DC

Lt Col James H. Kennedy III, USAF

AirForce ChiefTrial Attorney Christopher S. Cole, Esq. Joel B. Lofgren, Esq. Lt Col MarkE. Allen, USAF CaptAdam N. Olsen, USAF CaptMarc P. Mallone, USAF Jeffrey P. Hildebrant, Esq. Christine C. Piper, Esq. Marvin K. Gibbs, Esq.

Trial Attorneys

OPINION BYADMINISTRATIVE JUDGE JAMES ON THE PARTIES' MOTIONS FORRECONSIDERATION
On 5March 2015 the government moved for reconsideration1ofthe Board's 2 February 2015 decision (SUFINetwork Services, Inc., ASBCA No. 55306, 15-1 BCA

### ii 35,878) on remand from the U.S. Court ofFederal Claims (COFC) andthe U.S. Court ofAppeals for the Federal Circuit (CAFC) in which we sustained the captioned appeal inthe amount of$111,849,833.83 with interest thereon (in addition to the $2,790,930.17 awarded by the Board on SUFl's 16 counts not appealed to the COFC). On 31March2015 SUFI opposedrespondent's motion and cross-moved for reconsideration on CountXVI only. On 30 April 2015 respondent replied to SUFl's opposition and statedthat it had no objection to SUFl's cross-motion for

1The government has also requested that the Chairman refer its motion to the Board's Senior Deciding Group. See ASBCA Charter

### ii 4, 48 C.F.R. chap. 2, app'xA, pt. 1and Board Rules, preface II(c), 48 C.F.R. chap. 2, app'xA, pt. 2. SUFI opposes the request. The request has been denied.reconsideration. 2 Familiarity with all SUFI decisions bythe Board, COFC and CAFC is assumed.3

I. Respondent asserts generally that the Board's 2 February 2015 decision failed to comply with the CAFC's mandate, found facts that were arbitrary, capricious and unsupported by substantial evidence, and made substantial errors oflaw. Respondent
moves to "correct" our decision with respect to SUFI Counts III, XVI, V, VII, XVIII and IV (gov'tmot. at ii, 3, 29, 31, 38, 40-41). SUFI opposes that motion generally on the ground that it re-argues its previous positions on which it did not prevail, orwhich it could have raised, but failed to raise (app. opp'n at 4-5). We decide the specific issues in each SUFI count in the order raised by respondent's motion (gov't mot. at 3-41).

Count III. Respondent argues that the Board cited no evidence or findings of fact thatthere were "missing government DSN call records" that it withheld or destroyed, which negates the adverse inference drawn against it on Count III damages (gov't mot. at 4; gov'treply br. at 1-2). Respondent ignores SUFI VIII, finding 109(b): "respondent's call records for hallway/lobby DSN phones were incomplete

.... DISA call records lacked local base operator and commercial calls,
were collected on a best efforts basis, had data gaps due to transmission and processing outages" and finding 116: DISA call records "generally had days, months and years oflost data due to discarded, corrupted data for 1996-2000 and a PC crash in 2003." 09-1 BCA

### ,-r 34,018 at 168,238, 168,240. Because the DISA DSN call data had gaps due to transmission and processing outages, discarded and corrupted data and
a 2003 PC crash, it inescapably follows that such lost call data were "missing government DSN call records" (gov't mot. at 4; gov'treply br. at 1-2).
With respect to the government's duty to preservehallway/lobby DSN call data records, the guest lodging hallway/lobby DSNphones lacked adequate controls to block "fraud and toll skipping," SUFI notified the government ofits duty to remove hallway/lobby DSNphones from guest lodgings as early as mid-December 1996, and in 1997 the governmentbegan changing the hallway/lobby DSNphones from local to worldwide service, thus enabling fraud and toll skipping by lodging guests. SUFI VIII, 09-1BCAi-134,018 at 168,235-36, findings 84, 87, 91, 93. Thus, by no laterthan 1997, the government was on notice ofthe duty to preserve such call records.

2The parties' reconsideration filings comprise over 600 pages without attachments or appendices. 3Judge Monroe E. Freeman, Jr., whoparticipated in the decision to be reconsidered, has since retired.

2The CAFC'sremand stated on Count III: "the Board failed to considerwhether
an adverse inference shouldbe drawn againstthe government onthe issue ofthe missing call records

...even though it was on notice ofthis potential contract dispute." SUFIXVI, 755 F.3d 1305 at 1315. Onremand, the Board considered findings 84, 87, 91, 93 and drew the adverse inference that the missing DISA call record evidence does not support the government's defenses to Count III damages derived from SUFI's surrogate phone X.4619 call data. Proofofintentional destruction ofevidence or wrongdoing is not needed to draw such adverse inference. See Bigelow v. RKORadio Pictures, Inc., 327 U.S. 251, 263-66 (1946) (revenue loss from imprecise data was acceptable; no evidence ofdestruction ofevidence). In this case, that adverse inference and ourretraction ofthe SUFI VIII "official calls" misinterpretation ofthe contract terms specifying SUFI's earnedrevenues, supported ourholding that SUFI's surrogate phone X.4619 call data evidence was a reasonable estimate ofCount III damages and ourrejection ofthe government's "real-worldrecord facts" which do not support its theories ofdiscounted damages and revenue comparisons. SUFIXVII, 15-1 BCA**~** 35,878 at 175,396-97. Thus, we need not decide the issue ofgovernment waiver ofsuch damage theories (app. opp'n at 5, 7; gov'treply br. at 6-9). Our foregoing adverse inference did not dispense with SUFI's burden ofproofofdamages
as respondent asserts (gov'treply br. at 11-12). With respect to the foreseeability ofCount III hallway/lobby DSNphone abuse damages, the CAFC's stated criterion is: "SUFI mustprove
...that

...the loss was foreseeable

...at the time of contracting." SUFIXVI, 755 F.3d at 1312-13 (emphasis added). SUFI offeredDSN network service to the AirForce subject to the condition, "once adequate controls are developed with safeguards against fraud and toll skipping." SUFI VIII,**09-1BCA~34,018** at 168,235, finding 84. During the pre-award site survey, the COTRtold SUFI that governmenthallway/lobby DSN phones were "Class C" local. Id. at 168,235, finding 87. Contract section E-2 required the governmentto remove or make non-operational the hallway/lobby DSN phones. Id. at 168,235-36, 168,241, findings 89-90. These facts gave the government pre-award notice offoreseeable lost revenues due to toll skipping, including via hallway/lobby DSNphones. Respondent's arguments about the foreseeability oflodging phone usage fluctuations due to "(l) [the 1997 to 2000] de-regulation ofthe telecommunications industry, and (2) the terrorist strikes in the U.S. on September 11, 2001, and the ensuing wars in Iraq and Afghanistan" (gov'tmot. at 20-21), involve post-award events. Pursuantto the CAFC's above-quoted criterion, post-award factors are immaterial to foreseeability and were a sound basis for the Board's declining to take judicial notice, and excluding respondent's immaterial evidence, ofphone use fluctuations. Respondent's arguments to measure Count III damages by its "before/after studies" repeatprior arguments (gov'tbr. (SUFI VIII) at 136-37; gov't remand br. at 13, 15-50; gov'treply br. at 9-15) that we rejected, and hence do not

3qualify for reconsideration. See SUFI

### X, 10-1 BCA**~** 34,327 at 169,533 and decisions cited therein.

In conclusion, having reconsidered our decision on Count III, we affirm it.

Count XVI. The CAFC remanded Count XVI for the Board to recalculate lost profits on the basis ofa term of 15 years from the date ofcompletion and acceptance ofthe telephone system at each site. SUFIXVI, 755 F.3d at 1322. Respondent argues that the Board erred in deciding that the contract-specified 15-yearperformance periods began upon "acceptance" ofSUFI's LFTS at each site, ratherthan adopting its argument that such periodbegan at "cut-over," and modifying SUFI's 3-yearperiod to determine its average annual revenues (gov'tmot. at 29-31; gov'treply br. at 17-18).
With respect to the start date for the 15-yearperiod, respondent's argument for reconsideration repeats its previous arguments on remand (gov'tremand br. at 89-97). As cited in appellant's opposition at 5: "Amotion for reconsideration that restates arguments previously raised and considered by the Boardwill be denied." Kellogg Brown & RootServices, Inc., ASBCANos. 57530, 58161, 13 BCA**~** 35,379 at 173,602. Moreover, as stated in our decision on remand, the CAFC panel affirmed the COFC's "conclusion that SUFl'spost-termination lost profits should be calculated for
a term offifteen years from the date ofcompletion and acceptance ofthe telephone system at each site" as specified in contract section H.29. SUFIXVI, 755 F.3d at 1322. Thus "[w]e are not free to disregard the CAFC panel's unambiguous holding thatthe 15-yearterm commenced 'fromthe date ofcompletion and acceptance' ofthe LFTS."**15-1BCA~35,878** at 175,403. Respondent's ground for reconsideration is invalid.

With respect to SUFI's revenue averaging period, the COFC erroneously stated: "Neitherthe DCAA northe AirForce challengedthe use ofthis [January 2002 through May 2005] averaging period." SUFIXIV, 108 Fed. Cl. 287 at 320. Respondent challengedthatperiod ofuse before the COFC in May 2012 (gov'treply br., attach. 1 at 88-90). However, the CAFC did not remand the revenue averaging periodto the Board for further consideration. SUFIXVI, 755 F.3d at 1321-23. Thus, the Board's 2 February 2015 decision did not violate the CAFC'sremand, foreclosing this ground for reconsideration. Having reconsidered our decision on Count XVI, we affirm it.
Count V. Respondent argues that supplemental finding S12 (15-1 BCA**~** 35,878 at 175,398): (1) does not identify any facts that support the adverse inference drawn againstthe AirForce for its failure to produce government call records, because witness Margarito Castanon's testimony (tr. 18/138-40) cited in finding S12 does not address calls from the 34 indirect local numbers patchedto long distance commercial

4numbers for toll skipping, nor does it describe any government wrongdoing "thatthe AirForce intentionally, willfully, orthrough gross negligence destroyed the [call data]" or acted improperly, andMr. Castanon's other testimony (tr. 18/6-9) contradicts the Board's conclusion thatthe government failed to produce the pertinent call data records; and (2) is inconsistent withthe Board's 19 September 2006 ruling on SUFI's motion to compel (ex. B169 at 2), that the documents respondent produced under SUFI's specifications 1 and 8 for all documents related to SUFI's Count V claim were adequate (gov't mot. at 31-38; gov'treply br. at 15).

The context in which Mr. Castanon described USAFE's limited call data records

- due to their loss from its PC (computer) that sent call data to DISA in Europe and in USA (tr. 18/25-27)

- was the attempt ofa lodging guestto dial a local DSN number for commandpostpatching ofthe call to a CO NUS commercial number (tr. 18/137-39). This is the factual predicate ofSUFI's Count V, Other Operator Numbers Patching claim. Such limited DISA call data identified the local and long distance DSN numbers by which the call was patchedto a commercial number. That lost DISA call data, togetherwiththe unopposed evidence oflodging front desk personnelproviding guests with phone numbers to circumventthe SUFI system, (SUFI VIII, 09-1 BCA

### ii 34,018 at 168,250-51, findings 154-61), amply supported the adverse inference we drew against respondent in our decision on remand on Count V. 15-1 BCA

### ii 35,878 at 175,398.

Mistaken deletion and inadvertent loss ofDISA call data are sufficientproofof failure to discharge a legal duty. Intentional, willful, orgrossly negligent destruction
or spoliation ofevidence is notthe criterion for wrongdoing supporting a Bigelow adverse inference. Mr. Castanon's testimony that DISA call data were missing due to
a late 2003 hard drive crash, corrupted 1996-1999 data and mistaken deletion of2005 data (tr. 18/6-11), addressed specific documents (ex. B-98; supp. R4, tab 326.1), all of whichrelatedto SUFI's Count III, hallway/lobby DSNtelephone numbers (R4, tab 80A at 1724). Mr. Castanon's foregoing testimony was consistent with his testimony about Count V (tr. 181137-39), and indicates that lost DISA call data affected boththe Count III and Count V claims. See ourruling onreconsideration of Count III, above. Respondent's 8 September2006 oppositionto SUFI's 9 August 2006 motion to compel stated:

SUFI's motion alleges that the Government did not provide complete answers to its interrogatories and productionrequests. The Government attorney answered the interrogatories with information available onthe date it submitted its responses. The Government has requested the individuals providingthe factual responses to search

5for additional information. The Government intends to amend its responses ifadditional information is available. (Gov't opp'n dtd. 8 September 2006 at 2) In that context, the Board's 19 September 2006 ruling thatrespondent's document production was "adequate" meant no more than ithad produced the documents it had to SUFI. Respondent did not identify the extent ofDISA call dataproduced to SUFI. The ruling did not state or inferthat there
were no missing DISA call data.
The foregoing analyses confirm ourholding that our adverse inference
overcame the "evidentiary lacuna" that patched calls were not made to local commercial numbers. Thus, there is no correctionrequired for our findings and legal analysis in our Count V decision on remand. However, we clarify supplemental finding S12**(15-1BCA~35,878** at 175,398) as follows:

S12. The government did notproduce any DISA call data with respect to SUFI's Count V, Other Operator Numbers and Patching, that could have confirmed whether calls by lodging guests were patched to the operator for long distance toll-skipping, because such data were lost or missing due to the late 2003 hard drive crash, corrupted 1996-1999 data and mistakenly deleted 2005 data (tr. 17/285-86, 18/6-9, 25-27, 137-39).
Likewise, we clarify the second sentence in the second paragraph under "DECISION ON COUNTV" (15-1 BCA**~** 35,878 at 175,398) to state as follows:
The government did notproduce any DISA call data with respect to Count V, Other OperatorNumbers and Patching, that couldhave confirmed whether calls by lodging guests were patched to the operator for long distance toll-skipping, because such data were lost or missing due to the late 2003 hard drive crash, corrupted 1996-1999 data and mistakenly deleted 2005 data (finding S12).

To the extent ofthe foregoing clarifications, we grant respondent's motion for reconsideration ofour CountV decision.
Count VII. Respondent argues that the Board must rescind its ruling on Count VII and "make [the required] factual finding

...whetherthe two DSNtelephones [installed by SUFI] were the only administrative telephones available to the Delta Squadron to conduct its daily business" in the administrative area ofthe Delta Squadron Day Room, which "wouldhave undermined the Delta Squadron's ability to

6perform official business, unless the telephones were replaced" (gov't mot. at 38-39). SUFI contends that SUFI installed the two DSNphones in the "lounge" area ofthe Day Room, notthe administrative area (app. opp'n at 13).

In February-June 2003, about three years after the government had removed five or six DSNphones from the Day Room and SUFI had installed two DSN phones there (SUFI VIII,**09-1BCA~34,018** at 168,259, finding 202), Delta Squadron administrative personnel had available and used for official business three government DSN phones in the administrative area ofthe Day Room (tr. 10/143, 152, 168-69; supp. R4, tab 157 at 24, 32). Hence, to our decision on remand we add supplemental finding S25, following supplemental finding S24**(15-1BCA~35,878** at 175,401):
S25. In February-June 2003, about three years after the government had removed five or six DSN phones from the DayRoom and SUFI had installed two DSNphones there (SUFI VIII,**09-1BCA~34,018** at 168,259, finding 202), Delta Squadron administrative personnel had available and used for official business three government DSNphones in the administrative area ofthe Day Room (tr. 10/143, 152, 168-69; supp. R4, tab 157 at 24, 32). Respondent's assertion that the Board failed to make the factual findings on Count VII required bythe CAFC is invalid. Thus, there is no basis to rescind the holding in our CountVII decision. However, for clarification, we add finding S25 thereto, as set forth above. To the extent ofthe foregoing clarification, we grant respondent's motion for reconsideration ofour Count VII decision.

Count XVIII. Respondent argues that the Board's statement that on Count XVIII, "the parties agree within one penny ofthe amount to be awarded to SUFI,"**(15-1BCA~35,878** at 175,405), is mistaken because for CountXVIII respondent proposed $178,265.87, not the $209,351.16 claimed by SUFI (gov'tmot. at 40), and awarded by the Board onremand.**15-1BCA~35,878** at 175,405.
SUFI argues thatrespondenttacitly admitted that iftwo errors in respondent's calculations- 

### viz., double-counting the $22,129.36 in extra workpreviously granted by the Board and failing to include 202 hours ofextra workperformed by Ms. Ansola at the corrected hourly rate of$37.26, plus 10% profit as orderedby the CAFC remand, (SUFIIX, 09-2 BCA**~** 34,201at169,094)- are corrected, the parties' computations do not differ (app. remand reply br. at 56-58). Respondent rejoins that "the court" never found that SUFI was entitled to the 202 additional hours SUFI claimed for Ms. Ansola's extra work (gov'tremand reply br. at 83). While the COFC made no findings about extra work hours (108 Fed. Cl.

7287 at 311-12), the Board found that Ms. Ansola's 200 additional hours were included in SUFl's 13 February 2007 updated claim, (SUFI VIII, 09-1 BCAii 34,018 at 168,230, finding 72), and we have verified that by clerical error Ms. Ansola's 2 hours ofextrawork on 22 August 2002 were omitted from SUFl's Count XVIII claim (ex. B205, tab 19A at463, 471; app. remand reply hr. at 57 n.19). Therefore, respondent's calculation ofCountXVIII damages required corrections, as SUFI demonstrated, and SUFl's calculation of$209,351.16 (app. remand reply hr. at 58) is correct. Havingreconsidered our decision on Count XVIII, it is affirmed.

Count IV. Respondent argues that awarding SUFI lost revenues on CountXI German Troops Housing at Sembach Building 212 would duplicate the lost revenues awarded on Count IV, A&B Bed Switch, Use ofPins and LTS Switch at Spangdahlem, Rhein Main, Ramstein, Vogelweh and Landstuhl base lodgings (gov't mot. at40-41). Our 2 February 2015 decision correctly determined that there was no duplication ofrecovery with respect to Counts IV and XI. See 15-1BCAii35,878 at 175,402-03. Respondent's motion for reconsideration repeats the same argument asserted in its remand brief(at 88). See id. at 175,402. Accordingly, respondent's argument is not a basis for reconsideration. See SUFI

### X, 10-1 BCAii 34,327 at 169,533 and decisions citedtherein. Having reconsidered our decision on Count IV, it is affirmed.

II.

On 31March2015 SUFI moved for reconsideration ofthe Board's 2 February 2015 decision on CountXVI lost revenues, seeking a $1,404,665.10 increase ofthe amount awarded. The government's 30 April 2015 response to that motion stated: "TheRespondent has no objection to the proposed calculation adjustments contained in Appellant's Motion for Reconsideration to Correct Calculation ofLost Profits Amount." Accordingly, we grant SUFI's motion and award $57,175.117.10 for CountXVI damages, a $1,404,665.10 increase ofthe amount awarded in our 2 February 2015 decision.

CONCLUSION

We deny respondent's motion for reconsideration, except for the clarification of supplemental finding S12 and the second sentence in the secondparagraph under our "DECISION ON COUNT V," and the addition ofsupplemental finding S25 in our ruling on Count VII. We grant SUFI's motion for reconsideration and award

8$57, 175,117.10 in Count XVI damages, a $1,404,665.10 increase ofthe amount awarded in our 2 February 2015 decision onremand. SUFI is entitled to interest on this revised amount for CountXVI at the Federal Reserve Board monthly prime rate, as held in ourremand decision. See 15-1 BCA

## ii 35,878 at 175,405.
Dated: 20 May 2015

I concur

Administrative Judge Acting Chairman Armed Services Board ofContract Appeals Administrative Armed Service rd ofContractAppeals



# --

I certify that the foregoing is a true copy ofthe Opinion and Decision ofthe Armed Services Board ofContract Appeals in ASBCA No. 55306, Appeal ofSUFI Network Services, Inc., rendered in conformance with the Board's Charter.

Dated:

9 JEFFREY D. GARDIN Recorder, Armed Services Board ofContract Appeals