Concept_Phone-in-Motel-Room_399638Medium-224x300Last Friday, the Federal Circuit issued another decision in the relatively long-running saga of the SUFI Network Services, Inc. v. U.S. litigation, which relates to a telephone network installed by SUFI Network for guests in Air Force lodging facilities in Germany. The decision is down in the weeds of several damages law issues, but it appears to break some new ground that may be helpful for other contractors pursuing damages claims against the Government.

By way of necessary background, a 2004 decision by the ASBCA established that the Air Force Nonappropriated Funds Purchasing Office materially breached a contract by allowing/facilitating service members’ attempts to avoid SUFI Network’s rates (e.g., by using calling cards), resulting in a partial settlement agreement under which the phone network became the Air Force’s property. That partial settlement left open possibilities for litigating lost profits and other damages claims. The ASBCA then the Court of Federal Claims had issued rulings differing with respect to the damages amounts; last May, the Federal Circuit vacated “much of” the Court of Federal Claims’ “lost profits” decision. The lost profits claims have been the subject of a subsequent ASBCA decision on remand. While we await further review of the recent ASBCA decision, the Federal Circuit’s decision from last week addressed SUFI Network’s claims for attorneys fees and expenses related to its pursuit of lost profits, as well as the extent to which a contractor litigating a non-CDA claim can recover lost profits and overhead related to pursuing damages claims. The Federal Circuit came down on the contractor’s side on most of these issues.

The Federal Circuit’s opinion addressed five different legal questions. The issues of “interest” on the awarded attorneys fees and the “standard rates” awarded (sections III and IV of the opinion, respectively) appear to apply relatively straight-forward legal rules and do not merit comment. The court’s rulings regarding “exhaustion” of claims, ability to pursue attorneys fees, and whether the contractor could be awarded an amount to compensate it for overhead and lost profits related to attorneys fees paid to pursue its expectancy claims merit discussion.
Continue Reading The Federal Circuit Addresses Interesting Damages Issues in Its Second SUFI Network Opinion

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“Lost profits” are a standard measure of contract damages and, under long-standing precedent, are available as a basis for a judgment against the Government in a breach of contract case. That said, there aren’t that many cases in which a Government contractor actually demonstrates to the Court of Federal Claims or a Board of Contract Appeals that the various elements of a lost profits award have been satisfied under the applicable standards of proof—and then can get such an award affirmed on appeal. In last week’s SUFI Network Services v. US decision, another “lost profits” plaintiff had the vast majority of its lost profits award gutted by the Federal Circuit—and sent back for substantial additional determinations in a long-running lawsuit. The court’s opinion is instructive regarding the level of scrutiny that is given to such awards and the approach that Government contracts plaintiffs should consider in structuring claims for lost profits.

Continue Reading The Difficulties of Proving Lost Profits Damages Against the Government