Board of Contract Appeals General Services Administration Washington, D.C. 20405 _________________________ GRANTED: August 25, 1998 __________________________ GSBCA 13547-C(12989) GREENVILLE STORAGE & INVESTMENT, Applicant, v. GENERAL SERVICES ADMINISTRATION, Respondent. David C. Hammond, Elliott B. Adler, and Richard A. Medway of Powell, Goldstein, Frazer & Murphy, Washington, DC, counsel for Applicant. John C. Ringhausen, Office of Regional Counsel, General Services Administration, Atlanta, GA, counsel for Respondent. Before Board Judges DANIELS (Chairman), NEILL, and HYATT. NEILL, Board Judge. Appellant, Greenville Storage & Investment (Greenville), has filed an application for attorney fees and expenses incurred in connection with an appeal filed with this Board on September 22, 1994. Greenville's appeal was docketed as GSBCA 12989. In early October 1994, the Board issued an order for further proceedings. The parties thereupon proceeded to submit pleadings and to assemble materials for inclusion in the official appeal file for this case. In January 1995, the parties were authorized to engage in pretrial discovery and began to do so. On April 16, 1995, counsel for appellant filed a motion for summary relief. The issues raised in the motion were briefed in detail by both parties in subsequent submissions. In September 1995, the Board granted appellant's motion in part. Greenville Storage & Investment v. General Services Administration, GSBCA 12989, 96-1 BCA 27,992. Following the Board's decision, counsel for the parties met with the Board and later conferred among themselves to explore the possibility of settlement. On February 25, 1997, after prolonged negotiations, counsel advised the Board that, with the exception of appellant's application for attorney fees and costs under the Equal Access to Justice Act (EAJA), all remaining matters relating to the contracting officer's decision from which the appeal arose had been settled. After further discussion with counsel on the implications their settlement might have for the pending EAJA application, the Board, on June 3, 1997, dismissed the appeal with prejudice. The dismissal was issued with the understanding that (1) appellant's EAJA application would seek only the costs associated with the motion for partial summary relief and with the presentation and defense of the EAJA application itself and (2) respondent, in challenging the EAJA application, as then filed, would not rely on the fact of this dismissal. The original EAJA application had been previously filed by appellant in February 1996, following the Board's decision on Greenville's motion for summary relief. In it, appellant sought $16,965 in professional fees calculated at the EAJA rate and a total of $2196.60 in additional expenses. By letter dated November 6, 1997, counsel for appellant submitted a supplement to this claim. The supplement covers fees and expenses incurred by appellant in connection with litigation of the EAJA application following submission of the original application in February 1996.[foot #] 1 Based upon the following findings of fact and our discussion which follows, we grant the application. Findings of Fact[foot #] 2 1. The lease from which the dispute in GSBCA 12989 arose (the lease) was entered on October 15, 1987, and is said to be between "Earl Wilson" and the "United States of America, hereinafter called the Government." Under the lease, the lessor is to provide the lessee with warehouse space to be known as the General Services Administration (GSA) Distribution Center. The mailing address on the lease for the lessor, Mr. Wilson, is ----------- FOOTNOTE BEGINS --------- [foot #] 1 There have, in fact, been several submissions by the parties concerning appellant's application. For ease in citing to them in this decision, we identify them as follows: (1) Appellant's Application, (2) Respondent's First Response, (3) Appellant's First Reply, (4) Respondent's Second Response, (5) Appellant's Second Reply, (6) Respondent's Third Response, and (7) Appellant's Supplemental Claim. [foot #] 2 Unless otherwise noted, the exhibits referred to in these findings are found in the appeal file for the underlying case, namely, GSBCA 12989. ----------- FOOTNOTE ENDS ----------- 715 Atlantic Avenue, P.O. Box 7325, Greenville, North Carolina. Exhibit 1. 2. Evidence in the record demonstrates that, at least by 1992, Mr. Wilson was doing business with GSA from this Atlantic Avenue address as "Greenville Storage and Investment." A letter of January 30, 1992, from GSA's Field Office Manager concerning the warehouse is addressed to "Mr. Earl Wilson[,] Greenville Storage & Investment," and Mr. Wilson's letter of reply is on Greenville stationery. Exhibits 6, 7. Other letters from Mr. Wilson to GSA and written on Greenville stationery or addressed by GSA to Mr. Wilson at Greenville can be found in abundance in the record. Several of these letters were sent during the period prior to September 22, 1994, when Greenville filed its appeal. Exhibits 10-12, 14-15, 23, 30, 32-34, 40, 46. Indeed, the contracting officer's decision from which Greenville appealed is addressed to "Mr. Earl Wilson[,] Greenville Storage & Investment," and the notice of appeal is written on Greenville stationery. Exhibits 49, 51. In addition, various contract inspection reports issued during 1992 identify the contractor as "Greenville Storage." Exhibits 9, 13, 18. Finally, an internal GSA memorandum provided to the contracting officer in August 1992 refers to turnover of "Greenville employees" at the Distribution Center. Exhibit 16. 3. In a declaration given under penalty of perjury, the contracting officer confirms that the lease for the GSA Distribution Center shows Earl Wilson as lessor. The contracting officer further declares that subsequent supplemental lease agreements continue to identity Earl Wilson as the lessor except for one short period during which the lessor was identified as "Wilson Palmetto Partnership" and another short period during which the lessor was listed as "Earl Wilson, agent for Prudential Insurance Company of America." Respondent's Second Response, Exhibit A (Declaration of Palma F. Marron (Marron Declaration) (Sept. 16, 1997) 3 ). 4. In her declaration, the contracting officer has further stated: Earl C. Wilson has not requested that the GSA recognize Greenville Storage & Investment as the Lessor under the Lease. The GSA has not recognized Greenville Storage & Investment as the lessor under the Lease. The GSA will generally use any address provided by the lessor for mailing purposes. The use of 715 Atlantic Avenue, Greenville, NC and the use of the name Greenville Storage & Investment on correspondence is to insure prompt delivery of such correspondence. GSA will use any address provided by the lessor. Marron Declaration 4-7. 5. Earl Wilson, in an affidavit filed in support of Greenville's application for costs, states that he is the owner of an unincorporated business that is the lessor under Lease No. GS-04B-28085 (i.e. the GSA Distribution Center lease). He further states that, at the time Greenville's appeal was filed, the business had a net worth of less than seven million dollars. Appellant's Application, Exhibit B (Affidavit of Earl C. Wilson (Wilson Affidavit) (Feb. 27, 1996) 1, 4). 6. Also in support of its application for costs, appellant has submitted a statement of the financial condition of Earl C. Wilson as of December 6, 1994 (the financial statement). This statement was prepared by Mr. Wilson's certified public accountant (CPA) . The actual statement is preceded by what is termed an "Accountant's Report." This is a letter dated February 23, 1996, to Mr. Wilson from the CPA firm which prepared the statement. The letter advises that the statement is not an audited financial statement but is rather the compilation in financial statement format of information provided by Mr. Wilson himself. The letter also points out that the statement does not include a provision for estimated personal income taxes for the elapsed portion of the current tax year or for any unpaid income tax liability for all completed years. The final paragraph of the CPA's letter states: Earl C. Wilson has elected to omit substantially all of the disclosures required by generally accepted accounting principles. If the omitted disclosures were included in the statement of financial condition, they might influence the user's conclusions about the individual's financial condition. Accordingly, this statement of financial condition is not designed for those who are not informed about such matters. Appellant's Application, Exhibit B (Financial Statement at 3). 7. The individual who drafted the "Accountant's Report" which precedes Mr. Wilson's financial statement has provided for the record an affidavit clarifying this final paragraph in his report. He explains: The disclosures referenced in the February 23, 1996, letter which were omitted from the Financial Statement are primarily informational and do not have an impact on the ultimate net worth set forth in the Financial Statement. For example, some of the disclosures omitted would have required the following information (a) a profile of Earl Wilson, (b) a more specific identification of each of [the] warehouses referenced in the statement, including a listing of the major tenants and the location of each warehouse or a more thorough discussion of the terms of the notes payable referenced in the statement. Appellant's First Reply, Exhibit 1 (Affidavit of Calvin Shearin (Shearin Affidavit) (Aug. 18, 1997) 7). 8. In the same affidavit, Mr. Wilson's accountant states that he is a partner in the CPA firm which prepared the statement of financial condition, that the statement was prepared in accordance with the Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants, that he has worked as an accountant for Mr. Wilson individually and for Greenville for the past twelve years, and that, as a result, he is familiar with the financial condition of both Mr. Wilson and Greenville. This same accountant also states under oath that the financial statement reflects the net worth of Mr. Wilson. He further explains that the statement includes the net worth of Greenville as well. He notes: If a separate financial statement were prepared for solely Greenville Storage & Investment for the same time period and from the same information, the net worth of that entity would be well below $1 million. Shearin Affidavit 1-6. 9. The financial statement of Earl Wilson, after listing his various assets and liabilities, concludes that his net worth (assets minus liabilities), as of December 6, 1994, was $3,615,580. Financial Statement at 3-4. Discussion Eligibility of Applicant The principal controversy concerning this application is appellant's eligibility to recover attorney's fees and costs under EAJA. We, therefore, consider it first. Under EAJA, a party qualifying for an award of fees and expenses is defined as follows: "[P]arty" means a party, as defined in section 551(3) of this title [[foot #] 3], who is (I) an individual whose net worth did not exceed $2,000,000 at the time the adversary adjudication was initiated, or ----------- FOOTNOTE BEGINS --------- [foot #] 3 "[P]arty" includes a person or agency named or admitted as a party, or properly seeking and entitled as of right to be admitted as a party, in an agency proceeding, and a person or agency admitted by an agency as party for limited purposes . . . . 5 U.S.C. 551(3) (1994). ----------- FOOTNOTE ENDS ----------- (ii) any owner of an unincorporated business . . . the net worth of which did not exceed $7,000,000 at the time the adversary adjudication was initiated, and which had not more than 500 employees at the time the adversary adjudication was initiated . . . . 5 U.S.C. 504(b)(1)(B) (Supp. II 1996). First and foremost, we note that the underlying appeal in this case was filed by Greenville. Although the Government made no objection at the time to the fact that it was Greenville, not Earl Wilson, which appealed the contracting officer's decision, it now contends that the applicant is, in fact, the individual, Earl Wilson. Counsel for GSA points out that the lease is between Earl Wilson and the Government and that the lease has never been modified to recognize Greenville as lessor. Accordingly, GSA contends that the net worth ceiling in EAJA for eligibility should be that used for individuals, namely, $2,000,000. Because Mr. Wilson's net worth is in excess of this figure, the Government concludes that he is ineligible for an award under EAJA. Respondent's First Response at 4-5. Appellant's reply is that Greenville is an unincorporated business in whose name Mr. Wilson subsequently began to do business after entering into the lease in October 1987. Appellant, therefore, would apply the net worth ceiling in EAJA for eligibility which is used for an unincorporated business, namely, $7,000,000. We conclude that, by September 22, 1994, when Greenville filed its appeal, both parties had accepted the fact that Wilson, as lessor, was by then doing business with GSA as Greenville. We say this based upon our examination of the materials in the appeal file (see Finding 2) and, in particular, on the absence of any objection on the part of GSA to the manner in which that appeal was filed and subsequently captioned. We, consequently, see no reason why Mr. Wilson, as a sole proprietor doing business with GSA as Greenville at the time his appeal was filed, should not be subject to the net worth ceiling of $7,000,000 established in EAJA for unincorporated businesses such as his. In arriving at this conclusion, we have of course considered GSA's various arguments in opposition. GSA reminds us that Mr. Wilson never requested that the agency recognize Greenville as lessor and that GSA has not recognized Greenville as the lessor. It may well be that no formal name change was ever requested or processed. Nevertheless, we find no real significance in this fact. Such a change was not necessary. Greenville is not a separate corporate entity but simply another name under which Mr. Wilson, a sole proprietor, chose to do business with GSA. Whether doing business as Wilson or as Greenville, the same sole proprietorship remained legally accountable under the lease. Furthermore, by itself, the fact that no formal name change was ever sought or processed is hardly enough to convince us that Mr. Wilson intended to retain the lease as an individual asset somehow separate and independent from Greenville. GSA also calls attention to the fact that Mr. Wilson has at times referred to himself as lessor and at other times to Greenville as lessor. We are not troubled by these contrasting statements since, as already noted, Greenville is the Wilson sole proprietorship simply doing business under a different name. GSA also sees particular significance in Mr. Wilson's alleged failure to comply with Georgia state law requiring a business such as Greenville, whose name does not disclose individual ownership, to register in the office of the clerk of the superior court of the county in which the business is chiefly carried on. Whether Mr. Wilson is or is not in compliance with this requirement has no impact on our inquiry here. Our task in this case is to determine whether the Wilson sole proprietorship, in September 1994, was doing business with GSA as Greenville. Our conclusion that it was stands. It is well supported by evidence in the record. Even if it were to be demonstrated that the proprietorship failed to register as Greenville, this would not change our conclusion on the matter before us. Determination of Net Worth The Government argues, in the alternative, that even if the net worth ceiling of $7,000,000 is applicable to appellant as an unincorporated business, the net worth of Mr. Wilson at the time of his appeal was well in excess of this figure. The disagreement between the parties on this issue turns on the manner in which net worth is to be determined for purposes of applying the net worth ceilings under EAJA. Appellant contends that the value to be attributed to fixed assets in making this calculation should be the acquisition value and not the market value of an asset. GSA disagrees and contends that in calculating "net worth" one should value assets according to their market value. Just how critical this disagreement is to appellant's application can readily be seen in the valuation placed on Wilson's principal fixed asset, namely, the leased warehouse itself. The financial statement lists a value of $31,000,000 for this asset. Appellant readily admits that this represents the acquisition value and not the market value of the facility. Appellant's Second Reply at 6. Respondent, on the other hand, focuses on the fair market value of this property and claims that it was already, in 1989, worth considerably more than that figure. Counsel points to a valuation of $38,200,000 placed on the property by Prudential Insurance Company of America prior to making a loan to Mr. Wilson and to a market value of $44,000,000 placed on the same facility by Mr. Wilson himself in a certified personal financial statement dated March 12, 1989. Respondent also points to $1,500,000 in capital improvements made between 1989 and September 1994, which allegedly further increased the market value of the facility. Respondent's Second Response at 4- 5; Respondent's Third Response at 4-6. Counsel for the applicant does not deny the alleged market value of the leased warehouse in September 1994, but rather remains firm in the conviction that the use of acquisition values in preparing the financial statement filed in support of an EAJA application is correct. Clearly, if the applicant's contention is incorrect, then, on the basis of the leased warehouse alone (not to mention the other fixed assets with values presumably fixed in the same manner) the total value of all assets would increase by at least $7,200,000 -- if not $13,000,000. After subtraction of Mr. Wilson's total liabilities, his net worth would be, as the Government contends, unquestionably in excess of $7,000,000. The term "net worth," as used in EAJA with reference to a party's eligibility for award, is not defined in the statute itself. Its meaning, however, is expressly addressed in the Act's legislative history. "Net worth" is calculated by subtracting total liabilities from total assets. In determining the value of assets, the cost of acquisition rather than fair market value should be used. H.R. Rep. No. 1418, 96th Cong., 2d Sess. 15 (1980), reprinted in 1980 U.S.C.C.A.N. 4953, 4994; see United States v. 88.88 Acres of Land, 907 F.2d 106 (9th Cir. 1990). We recognize that it is well settled that the first step in interpreting a statute is to determine whether the language at issue has a plain and unambiguous meaning with regard to the particular dispute in a case. The plainness or ambiguity of the statute, however, has been said to be determined by reference to the language itself, the specific context in which that language is used, and the broader context of the statute as a whole. See Robinson v. Shell Oil Co., 117 S. Ct. 843, 846 (1997). In the instant case, given the absence of a definition of "net worth" in the statue, the particular dispute between the parties, and the statute's avowed purpose, we consider it appropriate to rely on relevant guidance provided in the Act's legislative history. For, as our appellate authority has observed: Where congressional intent would be thwarted absent reference to the legislative history, however, it is permissible to look beyond the specific language used, especially recognizing the Supreme Court's guidance that the EAJA be interpreted "in light of [the EAJA's] manifest purpose." Sullivan, Secretary of Health & Human Servs. v. Hudson, 490 U.S. 877, 890, 109 S.Ct. 2248, 2257, 104 L.Ed.2d 941 (1989). M.A. Mortenson Co. v. United States, 996 F.2d 1177, 1181 (Fed. Cir. 1993). Given the specific guidance in the legislative history concerning the calculation of net worth, we conclude that Mr. Wilson's accountant acted properly in using acquisition values for fixed assets in preparing the financial statement.[foot #] 4 We, therefore, reject GSA's contention that Mr. Wilson's net worth should have been calculated on the basis of the fair market value of his assets and we accept instead the applicant's calculation of a net worth of $3,615,580 as of December 6, 1994. Accordingly, we are satisfied that the net worth of Mr. Wilson as a sole proprietor doing business as Greenville falls well below the net worth ceiling under EAJA of $7,000,000 for an unincorporated business. GSA contends that the disclaimers contained in the accountant's report are so extensive as to render the financial statement which follows inherently unreliable on its face. Respondent's First Response at 2. We agree that, on its face, the letter from the CPA firm does raise some concern. In response to GSA's comments, however, appellant has submitted for the record an affidavit from the author of that letter. Appellant's First Reply, Exhibit 1. The clarifications and explanations provided in that affidavit (see Findings 7-8) convince us that the financial statement prepared by appellant's CPA is reliable and adequately supports the contention that the appellant falls well below the limits of the net worth EAJA ceiling applicable in this case. We find, therefore, that appellant has met its burden of proof regarding net worth. Substantial Justification of the Agency's Position EAJA precludes award of fees and expenses to an eligible party who has prevailed if the adjudicative official finds that the position of the agency "was substantially justified or that special circumstances make an award unjust." 5 U.S.C. 504(a)(1) (Supp. II 1996). GSA states that the issue in this ----------- FOOTNOTE BEGINS --------- [foot #] 4 We also note that the use of cost as a measure of value for fixed assets in statements of financial condition is a generally accepted accounting principle and is recognized as a sound conservative approach to valuation in that it avoids the risk of misleading asset writeups. See Howard W. Wright & ___ James P. Bedingfield, Government Contract Accounting 39 (1979). ______________________________ Furthermore, both the Ninth and the Seventh Circuits have recognized that the valuation of fixed assets at acquisition value for purposes of determining net worth under EAJA is in accordance with generally accepted accounting principles. See ___ American Pacific Concrete Pipe Co. v. National Labor Relations ----------- FOOTNOTE BEGINS --------- Board, 788 F.2d 586, 591 (9th Cir. 1986); Continental Web Press, _____ ______________________ Inc. v. National Labor Relations Board, 767 F.2d 321, 323 (7th ________________________________________ Cir. 1985). ----------- FOOTNOTE ENDS ----------- case was one of first impression and that the Government's position was, therefore substantially justified. Respondent's First Response at n.1. We disagree. The issue presented in this case was not one of first impression. As we noted in our decision, the Board had previously addressed the same issue involving an earlier version of the same contract clause. See David Kwok, GSBCA 7933, 90-1 BCA 22.292, aff'd 918 F.2d 187 (table) (Fed. Cir. 1990). We found the differences in versions of the clause to be insignificant. In Kwok we had concluded that the Failure in Performance clause was not intended as a remedy for a substantial and continuous breach. In Greenville, 96-1 BCA 27,992, still of the same opinion, we found respondent's use of the clause in the instant case to redress a similar alleged breach to be improper and unjustified. For obvious reasons, therefore, we cannot agree with GSA that the Government's position in this case was substantially justified. Appellant's Claim for Fees and Expenses Appellant's application, as supplemented, seeks compensation for a total of 260.9 hours of services. Under the hourly rate of the various individuals providing the services, this comes to a total of $43,891. Using EAJA's allowable rates, appellant has calculated a claim for fees amounting to $19,567.50. In addition, appellant has provided documentation in support of expenses which total $2207.78. Appellant's submission provides information on the total amount of time spent by each individual in counsel's firm who assisted on the case. Although it is clear from this data that several members of the firm's staff helped with the litigation, it can readily be seen that approximately ninety percent of the work was done by two of the three attorneys of record for the case. Also provided in support of appellant's application are forty-two pages of fee records which contain detailed entries of work performed and month-to-month breakdowns of fees and expenses incurred during the appeal. GSA contends that it is unable to determine whether the amount sought by appellant is reasonable since some of the detailed entries on the fee records neither indicate the precise amount of time spent on the individual task nor identify the individual performing it. We disagree. First, not all the entries on the fee records lack this information. Second, given the detail in each entry and the fact that ninety percent of the work was done by the two principal attorneys of record, it is not difficult to determine who performed the tasks described. Finally, although the amount of time spent on each task is not always listed, we view the total amount of time claimed by each of these two attorneys and their colleagues as clearly reasonable given the issues in the case and the tenacity with which GSA litigated the appeal and this application. Government counsel has also raised a number of objections to individual entries in appellant's fee records. We see no reason to reduce appellant's claim in view of any of these objections. The explanations and/or clarifications provided by counsel for appellant in response to these objections are entirely persuasive. In sum, we find the appellant's claim for fees and expenses to be reasonable. Decision Appellant's application for fees and expenses is GRANTED. The appellant is entitled to $19,567.50 in fees and to $2207.78 for expenses. ________________________ EDWIN B. NEILL Board Judge We concur: _______________________ ________________________ STEPHEN M. DANIELS CATHERINE B. HYATT Board Judge Board Judge