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12/23/83 Del Manufacturing Company v. United States of America

December 23, 1983





Appeal from the United States District Court for the District of Columbia (Civil Action No. 82 00153).


Tamm, Wald and Starr, Circuit Judges. Wald, Circuit Judge, dissenting. Opinion for the Court filed by Circuit Judge Starr..


This case arises under the Equal Access to Justice Act, 28 U.S.C. § 2412 (Supp. V 1981). Under section 204 of that Act , a court in a suit brought by or against the United States is directed to award attorneys' fees to a private prevailing party who satisfies certain financial eligibility requirements, unless "the position of the United States was substantially justified" or "special circumstances make an award unjust." Contesting the district court's award of attorneys' fees in this case, the government contends that under this court's supervening decision in Spencer v. NLRB, 229 U.S. App. D.C. 225, 712 F.2d 539 (D.C. Cir. 1983), "the position of the United States" within the meaning of the EAJA must be construed as the government's position during litigation, not governmental conduct prior to the initiation of legal proceedings. As Spencer was decided after the district court's decision, we now conclude, for reasons to be set forth below, that Spencer controls the instant case and that, accordingly, the award of attorneys' fees cannot stand. I

The story before us began uneventfully enough in August 1981 when the Navy Regional Contracting Center ("NRCC" or the "Navy") in Long Beach, California decided to obtain approximately 600,000 bomb cartridges for practice maneuvers during the following summer. The estimated value of this proposed procurement was approximately $2.1 million. In September 1981, the Small Business Administration proposed that NRCC reserve the cartridge procurement for Del Manufacturing Company ("Del") under section 8(a) of the Small Business Act, 15 U.S.C. § 637(a) (the "section 8(a) program"). Under section 8(a), which is designed to assist socially and economically disadvantaged businesses, a government agency contracts with the SBA, which in turn chooses a disadvantaged but capable company as subcontractor to perform work or provide goods or services to the agency.

In light of SBA's recommendation, NRCC representatives visited Del's plant in California and preliminarily concluded that Del was technically capable of manufacturing the cartridges. In a letter dated October 21, 1981, NRCC requested SBA to authorize Del to enter into negotiations. Foreshadowing the events which gave rise to this litigation, NRCC indicated that it intended to make the final contract award no later than December 31, 1981.

In contrast to the defense community's interest in prompt procurement, *fn1 SBA's procedures are designed to promote accuracy and reliability in large procurement decisions even at the expense of expedition. Thus, before authorizing a firm in the section 8(a) program to negotiate on SBA's behalf, SBA is required under governing procedures to perform a detailed review of the company's financial, technical and operational capabilities to perform the contract. Moreover, contracts over $2 million, like this one, require review by the Office of the SBA Administrator in Washington, D.C.

In the instant case SBA's evaluative task was complicated by a fire that damaged Del's plant in the fall of 1981. Despite uncertainty about the effects of this misfortune on Del's capabilities, SBA's district office in Los Angeles recommended in November 1981 to SBA's regional office in San Francisco that Del be certified to negotiate and perform the contract. SBA's regional office, however, expressed concern over Del's apparently weak financial condition, exacerbated by the recent fire, and accordingly on November 27, 1981, asked for more information.

As SBA's wheels were languidly grinding, the Navy's patience was wearing thin. NRCC expressed displeasure about the prolonged SBA review, whereupon in December 1981, SBA formally requested additional time to certify Del. The Navy agreed to the request. A breakthrough then seemingly occurred on December 14, when an official in SBA's regional office, assuming that he had authority to authorize a contract of this size, informally told the NRCC that it could begin negotiations with Del. *fn2 Inasmuch as the SBA Administrator's approval was necessary for a procurement of this size, however, the continuing process of SBA review wore on deeply into December. The California phase of SBA review finally concluded on December 17, when the San Francisco regional office recommended to SBA's Washington headquarters that Del be certified for the contract.

Further delays, however, attended SBA's review, inasmuch as SBA headquarters raised questions anew about Del's financial and operational capabilities and since the regional office's recommendation arrived in Washington with the advent of the holiday season. As the New Year dawned, NRCC sent a telegram on January 11, 1982, to SBA imposing a deadline of January 15. SBA immediately asked for an extension until January 22. The NRCC contract officer, however, refused to extend the deadline when SBA represented that it was uncertain whether a final decision would in fact be reached by the proposed extended date. True to its word, NRCC cancelled its request for procurement to SBA on January 15, 1982.

Realizing that his company's potential contract was in grave danger, Del's president immediately traveled to Washington in an effort to salvage the contract. Meeting with SBA officials on January 18, 1982, Del's president recommended that SBA invoke an intragovernmental dispute resolution mechanism that he thought applicable to the situation at hand. When these efforts on the morning of January 18 bore no immediate fruit, Del filed suit that afternoon in the United States District Court for the District of Columbia, seeking to enjoin NRCC from rescinding its request for procurement. At a status hearing on the day the suit was filed, the government, through an Assistant United States Attorney, agreed that NRCC would forebear until January 22 for the SBA's hoped-for certification.

Events finally moved toward a happy conclusion on the next day, when SBA's Deputy Administrator recommended that Del be certified. *fn3 At long last, and prior to the January 22 deadline, the SBA Administrator on January 21 officially authorized Del to negotiate the contract. Del's federal court action was, accordingly, dismissed by the parties' mutual consent on March 18, 1982.

This tale of two agencies would have thereupon ended, but for Del's seeking attorneys' fees under the Equal Access to Justice Act. In a memorandum opinion, the district court awarded Del fees and expenses in the amount of $4,275.04. Determining that Del was a "prevailing party," the court interpreted "the position of the United States" as including government action preceding litigation. The court found that while each agency's action, considered separately, might be deemed reasonable, their ...

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