Source: https://law.justia.com/cases/federal/appellate-courts/F2/699/1376/231915/
Timestamp: 2019-11-17 22:39:00
Document Index: 30245872

Matched Legal Cases: ['§ 2412', '§ 2412', '§ 504', '§ 611', '§ 2412', '§ 2412', 'in dubio']

Kay Manufacturing Company, Appellant, v. the United States, Appellee, 699 F.2d 1376 (Fed. Cir. 1983) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › Federal Circuit › 1983 › Kay Manufacturing Company, Appellant, v. the United States, Appellee
Kay Manufacturing Company, Appellant, v. the United States, Appellee, 699 F.2d 1376 (Fed. Cir. 1983)
U.S. Court of Appeals for the Federal Circuit - 699 F.2d 1376 (Fed. Cir. 1983) Feb. 18, 1983
This appeal is from a judgment of the United States Claims Court1 granting the request of Kay Manufacturing Company (Kay) for fees and expenses pursuant to the Equal Access to Justice Act (EAJA). 28 U.S.C. § 2412 (Supp. V 1981). We reverse.
The action that generated fees and expenses was brought in accordance with the Renegotiation Act of 1951, 50 U.S.C.App. Sec. 1211 et seq. (1976). In September, 1973, the Renegotiation Board ruled that Kay realized excess profits of $150,000 in 1969 from subcontracts for the machining of 105-mm cartridge case bases. Kay brought an action in the Court of Claims in December, 1973, seeking a determination that it had not realized any excess profits in 1969. Trial was held in 1978 after extensive pretrial discovery. The trial judge's opinion on the merits, issued September 29, 1980, found that Kay had realized excess profits of $111,332. On review, the Court of Claims rejected the trial judge's decision and held that the government failed to meet its burden of proving Kay's profits were excessive. Kay Mfg. Co. v. United States, 676 F.2d 555 (Ct. Cl. 1982). Kay's subsequent request for fees and expenses pursuant to the EAJA was granted in part by the trial court. Both parties appealed.
The trial judge found that differences between Kay's operations during the base periods and the review year rendered inadequate the government's base year comparison. Despite finding the government's proof to be unpersuasive, the trial judge determined that Kay realized excessive profits by using hypotheticals discussed at trial and assumptions made by the judge to alter the comparisons provided by Kay. The trial judge's resort to hypotheticals and assumptions to compensate for the differences between Kay and its competitors was an approach which may have been permitted by the Court of Claims decision in Major Coat Co. v. United States, 543 F.2d 97 (Ct. Cl. 1976). Kay Mfg. Co., 676 F.2d at 566. In Major Coat, the Court of Claims stressed the need for the government to provide comparative evidence of the profits of companies similar to the reviewed company to prove excessive profits. The court explained Major Coat in its review of the Kay Mfg. Co. case as follows:
The EAJA authorizes a court to "award reasonable fees and expenses of attorneys * * * to the prevailing party in any civil action brought by or against the United States * * * in any court having jurisdiction of such action." 28 U.S.C. § 2412(b) (Supp. IV 1980). The act applies to "any adversary adjudication * * * and any civil action * * * which is pending on, or commenced on or after" October 1, 1981. 5 U.S.C. § 504 note (Supp. IV 1980). We read the latter provision of the EAJA as a clear directive from Congress making the EAJA applicable to fees generated before the effective date of the act as well as after that date. The touchstone for determining whether the act applies is whether the action was pending on October 1, 1981, not whether the services were rendered before or after that date. The statement that a statute applies to cases "pending" on its effective date means precisely that, and unless Congress indicates otherwise, the statute applies in full to all such cases.
We do not agree with the government's contention that our analysis in Brookfield Construction Company v. United States, 661 F.2d 159 (Ct. Cl. 1981), requires a different conclusion. In Brookfield, the issue was whether a contractor who elected to proceed under the Contract Disputes Act (CDA) could recover interest for periods of time the case was pending prior to the effective date of the CDA. The statute interpreted in Brookfield provides that interest shall run "from the date the contracting officer receives the claim pursuant to section 6(a)." 41 U.S.C. § 611. The statutory provision at issue in Brookfield did not clearly permit the recovery of interest for periods before the effective date of the CDA. It was contended, for instance, that the contractor's claim could not be received "pursuant to section 6(a)" until the CDA was effective. The court in Brookfield therefore denied recovery of pre-CDA interest because the language of the statute was ambiguous and the legislative history did not indicate Congress anticipated the liability that would attend the award of pre-Act interest. No similar ambiguity is present in the provision of the EAJA at issue here.2
Although the statute permits recovery of fees and expenses incurred before as well as after October 1, 1981, the EAJA permits recovery only when the government's position in the litigation is not substantially justified. 28 U.S.C. § 2412(d) (1) (A) (Supp. V 1981). The trial court concluded that the position of the government was not substantially justified in light of the Court of Claims' decision on review of the merits. The trial judge emphasized that the government's comparison of Kay's 1969 profits to base year profits was inadequate and that the government's attack on Kay's comparative data was an argument that the data was not meaningful rather than a refutation with contradictory data. The analysis of the trial judge was in error.
Justification for the government's position at trial and on appeal must be measured against the law as it existed when the government was litigating the case, not against new law enunciated by the Court of Claims as a result of the appeal. Broad Avenue Laundry and Tailoring v. United States, 693 F.2d 1387, (Fed. Cir. 1982). The government's behavior, however, need not be reprehensible for fees and expenses to be awarded as suggested by the government. Under these standards the record shows that the government's positions at trial and on appeal had a reasonable basis.
Kay Mfg. Co., 676 F.2d at 558, note 7. As this quotation demonstrates, the government did not ignore economic reality but instead submitted evidence it judged to be the most probative in view of the economic conditions. The government's position at trial was further justified by case law allowing the use of comparisons similar to that proffered in this case to prove excessive profits. Gibralter Mfg. Co. v. United States, 546 F.2d 386 (Ct. Cl. 1976) (comparison of contractor's performance with his own performance in prior years); Camel Mfg. Co. v. United States, 572 F.2d 280 (Ct. Cl. 1978) (comparison of contractor's renegotiable business with his commercial business during the review period). The government therefore had a reasonable basis to pursue the case at trial.
The test is, as we have held in Broad Avenue Laundry and Tailoring v. United States, 693 F.2d 1387 (Fed. Cir. 1982), and Gava v. United States, 699 F.2d 1367, (Fed. Cir. 1983), decided this same day, whether conduct by government counsel was "reasonable." That their conduct may have been "reprehensible," whatever that meant, is abandoned as the test. But it still remains up to this court to determine and flesh out in concrete cases what it conceives to be "reasonable." In this regard, it must deem "unreasonable" conduct by government counsel that is the evil the statute, 28 U.S.C. § 2412, is aimed at. This we know is not simply that they took a stance which did not prevail. It is not even that they took a stance which could not prevail unless precedents were to be overruled. The most readily identifiable case is, I think, one when the chances of success depended chiefly on the adverse party running out of litigation resources, on the ignorance or inattention of the adjudicating tribunal, or on sheer bias and prejudice. Congress, I think, thought there were such cases, and so do I, though I also think they are far more atypical than some persons imagine. The usual and typical behavior of government counsel in the former Court of Claims, with which I was familiar, was responsible and reasonable. Counsel were in general well aware of their duty, as officers of the court, to assist in the "just, speedy, and inexpensive determination of every action," as called for by Rule 1 of that court. When there was a vast difference between the resources at their command, and those of their adversary, they tried not to exploit the fact unfairly. When they knew of legal precedents favorable to their adversary's position, but unknown to him, they disclosed them. They cooperated in necessary discovery, only demanding cooperation in return. But there were occasional unfortunate exceptions, often due to inexperience and excessive zeal.
The Court of Claims, in the exercise of its newly imposed duty of making excessive profits redeterminations, was also guided by the fact that Congress was dissatisfied with the allocation of burden of proof by the Tax Court previously. We held that once the contractor had established the relevant financial data it relied on, and made a prima facie case, the burden shifted to the government to show how to construct an excessive profits determination from these figures, from comparable figures for other contractors or for the contractor itself at other times, and from performance information. Lykes Bros. Steamship Co. v. United States, 459 F.2d 1393 (Ct. Cl. 1972). In Major Coat Co. v. United States, 543 F.2d 97 (Ct. Cl. 1976), the court confronted a situation where, in the case before it, and in many others, the parties, in ignorance of the standards the court would apply, had conducted trials in a manner that failed to satisfy the proper burdens of proof. To avoid failure of justice in those cases, or demanding repeats of the prolonged and costly trials, the court said it would itself rework the raw data "for a limited period." I was and remain dubious about this because I doubted if it was proper for the court to constitute itself its own expert witness and build its structure of reasoning as a do-it-yourself operation. Only government sought a rehearing in Major Coat, as the outcome of the court's deliberation was a clear government defeat. Had the contractor sought rehearing, I might have supported it. See also my dissent in Mason & Hanger-Silas Mason Co. v. United States, 518 F.2d 1341, 1365 (Ct. Cl. 1975). Having had more personal experience with statutory renegotiation than our other judges, perhaps I was more conscious than they of my personal inability, trained only as a lawyer, to make an excessive profits determination. However, by Major Coat the right and proper rule was to be established respecting trials conducted post-Major Coat, and on this we all agreed. Meanwhile, we all enjoyed the satisfaction of playing God in cases tried pre-Major Coat, and I must admit I did it too.
Our opinion in this regard is consistent with interpretations of several other courts: United States for Heydt v. Citizens State Bank, 668 F.2d 444 (8th Cir. 1982); Photo Data, Inc. v. Sawyer, 533 F. Supp. 348 (D.D.C. 1982); Wolverton v. Schweiker, 533 F. Supp. 420 (D. Idaho 1982); contra Allen v. United States, 547 F. Supp. 357 (N.D. Ill. 1982)