March 1, 2005

Appeal of

MIKE L. NOBLE

Under Contract No. HCR 93575

PSBCA No. 5046

APPEARANCE FOR APPELLANT:

Steven E. Brown, Esq.

APPEARANCE FOR RESPONDENT:

Robert E. O'Connell, Esq.

OPINION OF THE BOARD ON EAJA APPLICATION

Appellant, Mike L. Noble, has filed a timely application under the Equal Access to Justice Act (“EAJA”), 5 U.S.C. §504, as amended, for attorney fees and expenses totaling $7,010.01 incurred in connection with his prosecution of this appeal of Respondent’s termination of Appellant’s mail delivery contract.

Background

Appellant contracted to deliver mail for Respondent, and hired two employees to perform the deliveries. In early June 2003, the two employees stole or permitted the theft of mail instead of delivering it. A postal inspector investigated the incident and issued a report to the contracting officer that indicated that Appellant’s employees had stolen or permitted the theft of at least a full tray of mail. The misconduct was discovered on what was to be the employees’ last day of work, and Appellant immediately hired another driver to replace them. The replacement driver delivered the mail satisfactorily for more than three months, until the contract was terminated. The contracting officer’s decision to terminate the contract was based on the inspector’s report, and, in assessing Appellant’s culpability, the contracting officer gave credit to the postal inspector’s memorandum of an unsworn interview with one of the accused employees that suggested that Appellant did not properly screen the employees and that he should have known they were unreliable. The inspector’s report was delivered to the contracting officer on July 24, 2003, and he terminated the contract on September 26, 2003.

While recognizing that Appellant, as the contractor, was responsible for the misconduct of his employees and that the theft of mail from the route was a serious breach of Appellant’s contractual duties, the Board concluded that Appellant had adequately screened his employees and had no reason to suspect they were unreliable. For that reason and because Appellant had satisfactorily performed the contract for three months after those employees were removed, we found that the contracting officer abused his discretion in terminating the contract and sustained the appeal. Mike L. Noble, PSBCA No. 5046, 04-2 BCA ¶ 32,727. Appellant seeks an EAJA award to recover attorney fees and expenses incurred in prosecuting the appeal.

Decision

Appellant meets the eligibility requirements for an award, 39 C.F.R. §960.4 (b)(1) (Declaration of Mike L. Noble), and was a prevailing party in the appeal. Respondent so concedes, but opposes an award of fees and expenses, arguing that the contracting officer’s termination and Respondent’s defense of the termination in the appeal were reasonable under the circumstances. Respondent points to the Board’s finding that Appellant breached requirements in the contract that he protect and safeguard the mail and argues that Respondent’s actions were substantially justified.

To avoid an award of attorney fees under EAJA, it is Respondent’s burden to demonstrate that the termination of Appellant’s contract for default and the subsequent litigation in defense of that termination had a reasonable basis in law and fact. Its conduct will be found substantially justified “if a reasonable person could think it correct.” Pierce v. Underwood, 487 U.S. 552, 565-66, n. 2 (1988); see Commissioner v. Jean, 496 U.S. 154, 110 S. Ct. 2316, 110 L. Ed. 2d 134 (1990); The Little Susitna Co., PSBCA Nos. 2216, 2333, 2511, 93-1 BCA ¶ 25,497; 5 U.S.C. §504(b)(1). That the Board overturned the termination for default does not by itself establish that Respondent’s position was not substantially justified, although it remains Respondent’s burden to demonstrate it acted reasonably. See Broad Avenue Laundry and Tailoring v. United States, 693 F.2d 1387, 1391 (Fed. Cir. 1982); American Sheet Metal Corp. v. General Services Administration, GSBCA No. 15165‑C, 00-2 BCA ¶ 31,126 at 153,758; The Little Susitna Co., PSBCA Nos. 2216, 2333, 2511, 93-1 BCA ¶ 25,497.

Under the contract, Appellant was responsible for the mail entrusted to him, and the theft of mail from the route was a serious violation of the contractual requirements regarding security of the mail. Even though Appellant did not participate personally in the employees’ misconduct, as the contractor he remained ultimately responsible to Respondent for his employees’ malfeasance, and their action constituted a default under the contract. Mike L. Noble, PSBCA No. 5046, 04-2 BCA ¶ 32,727 at 161,893. The Board recognized that through his employees’ conduct, Appellant had breached the contract but concluded that, on balance, the breach did not warrant imposition of the drastic sanction of a default termination under the circumstances.

The Board reached its decision based on the record made in the appeal, including the testimonial evidence presented at the hearing. Appellant’s former employee, whose memorandum of interview was in the postal inspector’s report provided to the contracting officer, did not testify at the hearing, and the Board gave great weight to Appellant’s sworn, credible testimony that he had properly screened the employees and that he had no reason to believe they should not have been trusted to deliver the mail. The contracting officer in making his decision to terminate the contract and Respondent in deciding to defend that action did not have the benefit of that sworn testimony. As the strength of Appellant’s case only became clear through evidence presented at the hearing, Respondent’s termination of the contract and defense of the termination, although found by the Board to be an abuse of discretion based on all the evidence presented to the Board, was, nevertheless, reasonable and, thus, substantially justified. See Karcher Environmental, Inc., PSBCA Nos. 4085, 4093, 4282, 02-1 BCA 31,787 at 156,961, n. 3; American Federal Contractors, Inc., PSBCA No. 1359, 88-2 BCA ¶ 20,526 at 103,766; Jack L. Olsen, Inc., AGBCA No. 95-119-10, 96-1 BCA ¶ 28,052 at 140,076; Hurlen Constr. Co., ASBCA No. 31069, 86-3 BCA ¶ 19,153. We are persuaded that given the evidence of mishandling and theft of mail by Appellant’s employees, a reasonable person could conclude that the termination for default and its defense in this appeal had a reasonable basis and were correct. See Timber Rock Reforestation, AGBCA No. 97-117-10, 97-2 BCA ¶ 29,122; D.E.W., Inc., ASBCA No. 35896, 96-1 BCA ¶ 28,031 at 139,947.

The Board finds that Respondent’s termination of the contract and its conduct in litigating this appeal were substantially justified. Accordingly, Appellant is not entitled to his fees or expenses. The application is denied.

Norman D. Menegat

Administrative Judge

Board Member

I concur:

James A. Cohen

Administrative Judge

Chairman

David I. Brochstein

Administrative Judge

Vice Chairman