[00:00:41] Speaker 00:
Mr. McLaughlin, you've reserved three minutes for rebuttal.

[00:00:44] Speaker 00:
Is that correct?

[00:00:45] Speaker 03:
Correct, your honor.

[00:01:06] Speaker 04:
Okay.

[00:01:06] Speaker 04:
Good morning.

[00:01:07] Speaker 04:
May it please the court.

[00:01:07] Speaker 04:
My name is Brian Telly McLaughlin.

[00:01:09] Speaker 04:
I represent Sufi Network Services.

[00:01:11] Speaker 04:
The Court of Federal Claims made two major errors in this action on remand that we ask this court to reverse.

[00:01:20] Speaker 04:
First, with respect to overhead and profit, it violated this court's mandate.

[00:01:24] Speaker 04:
And second, it failed to reopen the record to allow Sufi to prove its actual costs in spite of significant changes in the evidence and an intervening decision.

[00:01:34] Speaker 04:
I'm going to briefly address overhead and profit first.

[00:01:37] Speaker 04:
On overhead and profit,

[00:01:40] Speaker 04:
The court violated the mandate because it went back and did an analysis that was already foreclosed by the law of the case.

[00:01:48] Speaker 04:
It applied a foreseeability analysis to the overhead of profit, the indirect cost for Sufi.

[00:01:55] Speaker 04:
And the problem with that is that the Court of Federal Claims in the initial proceedings had already ruled that Sufi's attorney fee claim for claim preparation fees was a direct foreseeable consequence of the Air Force's breach.

[00:02:10] Speaker 04:
And that ruling was affirmed by this court.

[00:02:12] Speaker 04:
And it's the type of damage, which is the claim preparation fees, that matters for foreseeability.

[00:02:21] Speaker 04:
And that's exactly what this court ruled when it's cited to Energy Northwest, in which a similar argument analysis that the court of federal claims applied here was rejected by the Federal Circuit.

[00:02:34] Speaker 05:
Before I forget, I just had a quick question.

[00:02:37] Speaker 05:
There's been a lot of litigation here on this contract dispute.

[00:02:42] Speaker 05:
Is this the last litigation?

[00:02:44] Speaker 05:
Is this the last piece of the litigation?

[00:02:47] Speaker 04:
I'd like to say that it was, but there's still more.

[00:02:52] Speaker 04:
Well, there's two principal litigations that we refer to.

[00:02:56] Speaker 04:
One is we tend to refer to as big Sufi, and that's the principal action, the original action before the board for the damages claims.

[00:03:04] Speaker 04:
That one has been on appeal twice.

[00:03:07] Speaker 04:
And so that is almost over, but for the fact that there has now been an Equal Access to Justice Act litigation fee award that the government has now appealed.

[00:03:18] Speaker 04:
So that case continues in a certain extent.

[00:03:21] Speaker 04:
And there's also a small claim before the Armed Service Board for claim preparation fees that were not covered by this case that I'm talking about.

[00:03:29] Speaker 04:
And this case, we tend to refer to as little Sufi.

[00:03:33] Speaker 05:
So this is claim preparation recovery related to the attorney's fees.

[00:03:39] Speaker 05:
That's what this case is.

[00:03:40] Speaker 04:
Correct.

[00:03:41] Speaker 04:
This case is about Sufi's claim preparation fees and only with respect to the attorney's portion of those fees.

[00:03:50] Speaker 04:
The claim preparation that was done by Sufi's direct employees as well as a non-legal consultant has already been awarded in prior proceedings before the board.

[00:04:05] Speaker 04:
And I'm going to probably come back to that when I get to the other issue about the actual cost, because I think the history of the two cases is not only complex and lengthy, but it may be confusing in how the Court analyzes this.

[00:04:22] Speaker 04:
So on the overhead and profit, again, this Court's ruling in citing energy in Northwest had already foreclosed the foreseeability analysis that the Court of Federal Claims then applied.

[00:04:34] Speaker 04:
In Energy Northwest, there was damages flowing from a breach, and then there were indirect costs because of that.

[00:04:44] Speaker 04:
And in there, the government challenged, made similar challenges such as foreseeability, causation, et cetera, about the indirect expenses, the overhead.

[00:04:54] Speaker 04:
The Federal Circuit foreclosed that analysis and said that once the type of damage, once the original breach is shown,

[00:05:03] Speaker 04:
to have caused damage, then the non-breaching party is entitled to prove its indirect costs.

[00:05:10] Speaker 04:
That's the same thing that this court ruled that the Court of Federal Claims should do on remand.

[00:05:17] Speaker 04:
And on remand for a second time, the Court of Federal Claims rejected that.

[00:05:22] Speaker 05:
I thought the Court of Federal Claims simply said, we've taken into account your arguments.

[00:05:29] Speaker 05:
aren't satisfied that you met your burden of establishing why you're entitled to lost profits on the fees your attorneys collected, as well as overhead on that.

[00:05:42] Speaker 04:
Yeah.

[00:05:44] Speaker 04:
Well, that's the second mistake that the court made.

[00:05:46] Speaker 04:
The court, in flowing through its foreseeability analysis, it said that it didn't find that there were any indirect costs.

[00:05:55] Speaker 04:
And that is patently wrong.

[00:05:57] Speaker 04:
We presented, the court doesn't cite, but we presented, and in the original appeal, we noticed that we presented this court as well, that there was significant evidence of Sufi's indirect costs already in the record.

[00:06:13] Speaker 04:
There's time entries from the attorney fee claims showing Sufi's involvement in managing the attorneys.

[00:06:18] Speaker 00:
It's almost related to the claims themselves, the big claims, as you put it, not to the attorney's fees claims, correct?

[00:06:29] Speaker 00:
I'm sorry, could you repeat that?

[00:06:31] Speaker 00:
What you're saying that the court had already made a determination as to foreseeability of indirect expenses, that was not with respect to the attorney's fees.

[00:06:45] Speaker 00:
That was all with respect to the claims that it prepared.

[00:06:49] Speaker 04:
No, not exactly.

[00:06:51] Speaker 04:
What the Court of Federal Claims ruled in the initial proceedings in this matter, which was affirmed by this court,

[00:06:57] Speaker 04:
was that the claim preparation fees done by the attorneys, by that work, was a direct and foreseeable consequence of the Air Force's breach.

[00:07:06] Speaker 04:
And so what this court ruled, citing Energy Northwest, was that once that's been decided, the indirect costs that flow from that breach, the plaintiff is entitled to prove them.

[00:07:20] Speaker 04:
And by whatever evidence is reasonably available.

[00:07:23] Speaker 04:
And that evidence, which there is evidence, and it was

[00:07:26] Speaker 04:
It was essentially ignored by the Court of Federal Claims.

[00:07:29] Speaker 04:
What the Court said was that there was no significant value to Sufi's role in managing its attorneys.

[00:07:38] Speaker 05:
You said that evidence is in the record, but I guess what I'm wondering is, was it incumbent upon the judge below to go find that evidence in the record?

[00:07:50] Speaker 05:
I mean, it was up to you to pull it together and put a bow on it, right?

[00:07:56] Speaker 04:
Yes, but we didn't have that opportunity, Your Honor.

[00:08:00] Speaker 04:
The parties were going to go to remand proceedings, and we had agreed that for expediency that we thought there might be an opportunity to resolve things simply on the papers.

[00:08:11] Speaker 04:
But we did request for overhead in particular that we were going to need some additional testimony to help explain to the court

[00:08:22] Speaker 04:
the evidence regarding overhead indirect costs.

[00:08:25] Speaker 02:
That was already in the record.

[00:08:26] Speaker 02:
Supposing the remand simply said to the Court of Federal Claims, apply the common law, still exceed the scope of the mandate?

[00:08:42] Speaker 04:
Yes, it did.

[00:08:45] Speaker 04:
As I said, based on Energy Northwest, the analysis... That's all the common law there is?

[00:08:53] Speaker 04:
That's the most relevant common law.

[00:08:55] Speaker 04:
And again, Energy Northwest says, you don't reconduct that analysis for the indirect costs that have flowed from the underlying type of damage, which is the claim preparation fees.

[00:09:06] Speaker 04:
So that was the problem there.

[00:09:10] Speaker 04:
Just to get back to my other point about what the evidence was and whether there were any indirect costs is that the Court of Federal Claims there opined that Sufi didn't play any

[00:09:22] Speaker 04:
quote, significant role in the claim preparation efforts.

[00:09:26] Speaker 04:
And that, in a sense, is the same analysis that this court overruled initially when it wrongly applied before, which had an excessive pass-through charges clause about whether the management has been more than a negligible value.

[00:09:46] Speaker 04:
So this court ruled there's no basis to

[00:09:49] Speaker 04:
disqualified Sufi from getting its indirect costs by opining that it wasn't significant or not.

[00:09:55] Speaker 04:
Sufi was entitled to prove what those costs were and was entitled to recover them.

[00:09:59] Speaker 04:
So for both of those bases, we are asking for a remand to reopen the record on our indirect costs, including for some additional testimony by our expert, which is what we had requested below.

[00:10:13] Speaker 04:
I'm going to move to the second issue, which is on our actual damages.

[00:10:18] Speaker 04:
Here the court

[00:10:19] Speaker 04:
denied our request to reopen the record to prove our actual damage in attorneys fees for claim preparation work and ignored, did not even cite to or discuss in its opinion the two independent bases that we had provided that

[00:10:35] Speaker 05:
that met the standard of reopening the record, which is that there was a significant... Are we now talking about your request to recover the contingency fee?

[00:10:47] Speaker 05:
Is that what we're talking about right now?

[00:10:48] Speaker 04:
Yes, Your Honor.

[00:10:49] Speaker 04:
Okay.

[00:10:51] Speaker 04:
And to frame that, I guess, for you is that initially the fees were awarded under a load start basis.

[00:11:01] Speaker 05:
So the quantum was... But that was at Sufi's request, right?

[00:11:06] Speaker 05:
Sufi was urging from the beginning a lodestar methodology for calculating recovery of attorney's fees.

[00:11:14] Speaker 05:
Is that right?

[00:11:16] Speaker 04:
That's correct.

[00:11:16] Speaker 05:
Did it ever argue in the alternative?

[00:11:18] Speaker 05:
OK.

[00:11:19] Speaker 05:
Well, either lodestar or recover the contingency fee arrangement

[00:11:27] Speaker 05:
Depending on whichever one I end up benefiting more from.

[00:11:33] Speaker 04:
Right.

[00:11:34] Speaker 04:
We didn't in our complaint, but we did in a brief unsummary judgment in the lower proceedings, give notice to the government that if it wanted to apply the fact of the contingency arrangement to how some of the damages, particularly her interest was measured,

[00:11:53] Speaker 04:
that we thought we should go back and calculate fees based on the actual costs, i.e.

[00:11:59] Speaker 04:
the contingency arrangement.

[00:12:00] Speaker 04:
And here I want to step back because your question goes right to one of our bases for reopening the record, which is that there was a significant change in the evidence.

[00:12:11] Speaker 04:
So when we, and here I need to again go to Big Sufi and Little Sufi.

[00:12:16] Speaker 04:
So first in Big Sufi, the main damages claims, by 2010,

[00:12:23] Speaker 04:
we had recovered about $7 million from the Armed Services Board.

[00:12:29] Speaker 04:
And so that amount effectively set by the contingency what the attorney's fees would be that Sufi would have to pay.

[00:12:39] Speaker 04:
It was after that time, in late 2010, that in Little Sufi, we filed our claim for claim preparation attorney's fees to the contracting officer and then appealed to the Court of Federal Claims.

[00:12:53] Speaker 04:
Comparing what the fees quantum would be based on a load star versus the contingency off of 7 million, those numbers roughly came out the same.

[00:13:05] Speaker 05:
And so there was no... If this arrangement all along had never been just paying the law firm based on an hourly rate, but it had always been the contingency fee arrangement, then that would be the most accurate

[00:13:23] Speaker 05:
way of recovering attorney's fees.

[00:13:25] Speaker 05:
I don't understand why didn't Sufi all along from the very beginning request recoveries for the actual fees that it was going to have to pay to its attorneys, i.e.

[00:13:35] Speaker 05:
the attorney fee, contingency fee arrangement.

[00:13:38] Speaker 04:
Well, we made a judgment, but it was based, again, as I just mentioned first on the fact that there was no real difference between what that quantum would be based on the evidence that we had, the awards.

[00:13:50] Speaker 05:
But is it fair to say the most accurate

[00:13:52] Speaker 05:
measurement of the actual attorney's fees that Sufi would have to pay would be whatever is reflected in the contingency fee arrangement.

[00:14:01] Speaker 04:
I think that's correct, but I guess that also goes into the second issue here, which is that the law, it was our belief that we had no basis to calculate the fees, to be awarded them under the, based on the contingency at that point.

[00:14:18] Speaker 04:
And the court, in its opinion here, noted that that was how we presented our claim.

[00:14:27] Speaker 04:
Because even though it's claim preparation, it still has attorney's fees, and it's often thought of as something special, that looking at the case law that was out there on Eagle Access to Justice Act cases, they always do it based on a lodestar, even when there's a contingency agreement in place.

[00:14:44] Speaker 04:
Supreme Court fee-shifting statute cases

[00:14:47] Speaker 04:
It's always done based on the load star.

[00:14:49] Speaker 04:
So we didn't think that we could recover quantum based on the actual contingency agreement, notwithstanding that we had one.

[00:15:00] Speaker 04:
So those were the two things that were in play.

[00:15:03] Speaker 04:
But then things changed.

[00:15:04] Speaker 04:
And that's what I wanted to get to, is that... Well, I want to get to something.

[00:15:08] Speaker 02:
Ordinarily, I wouldn't give you a second bite of the apple on a question.

[00:15:13] Speaker 02:
But I want to be clear on this.

[00:15:16] Speaker 02:
if we interpret the mandate and simply apply the common law, and your answer was simply, Energy Northwest, go away.

[00:15:24] Speaker 02:
But the Court of Federal Claims says at head note two, we'll turn to the elements for establishing recovery under the common law and then goes through a step-by-step analysis.

[00:15:38] Speaker 02:
And you're just saying, well, didn't follow Energy Northwest, so forget about it.

[00:15:43] Speaker 02:
Is that your full answer to that?

[00:15:46] Speaker 04:
That's that's correct, and I want to be clear that I'm talking about the overhead and profit analysis there So if you're asking me does that relate?

[00:15:55] Speaker 04:
I'm not clear if what you're asking if my answer relates also to the actual damage argument we have I'm afraid to ask but I'll ask anyway.

[00:16:04] Speaker 05:
What's the theory behind trying to collect each of fees on top of the attorneys fees?

[00:16:11] Speaker 04:
they're very different because the the

[00:16:14] Speaker 04:
Again, here we're at claim preparation.

[00:16:15] Speaker 04:
This is non-litigation fees.

[00:16:18] Speaker 05:
No, but you were awarded attorney's fees.

[00:16:20] Speaker 04:
Yes, EJA fees are litigation fees.

[00:16:24] Speaker 04:
So claim preparation fees were for preparing the claims that went to the contracting officer, among negotiating them with the contracting officer.

[00:16:34] Speaker 04:
EJA fees are the fees for prosecuting the claim.

[00:16:38] Speaker 04:
The FAR makes a distinction, even though the FAR doesn't apply here.

[00:16:41] Speaker 04:
between non-legation or administrative fees versus costs that are prosecution of a claim.

[00:16:48] Speaker 04:
So and that's why.

[00:16:50] Speaker 00:
And the overhead and profit that you're looking for now, that's related to attorney fees incurred in preparation of attorney fees, a submission of attorney fees?

[00:17:03] Speaker 04:
Correct.

[00:17:04] Speaker 04:
Which this court, your honor, previously directed the court to award.

[00:17:09] Speaker 04:
I'm well into my rebuttal time.

[00:17:12] Speaker 00:
Well, we told the Court of Federal Claims to apply the common law when to decide that question.

[00:17:18] Speaker 03:
Correct.

[00:17:20] Speaker 03:
I'm well into my rebuttal time, so I'll have to reserve.

[00:17:22] Speaker 03:
Okay, you're out of time, so let's move on.

[00:17:31] Speaker 01:
Good morning, Your Honors.

[00:17:32] Speaker 01:
May it please the Court?

[00:17:33] Speaker 01:
The Court of Federal Claims properly applied common law to find Sufi not entitled to overhead and profit.

[00:17:39] Speaker 01:
As the court's already alluded to, this court held that the common law, rather than the FAR applied, the Court of Federal Claims, pursuant to this court's mandate, identified the issue as whether Sufi should receive additional profit and overhead as a markup on the attorney's fees of its outside law firm.

[00:17:55] Speaker 01:
It then, in a very detailed manner, went through foreseeability, went through substantial causal factor, and went through reasonable certainty.

[00:18:03] Speaker 01:
and found facts for all three elements that Sufi had not met these elements.

[00:18:12] Speaker 01:
All three elements.

[00:18:12] Speaker 01:
So unless this court's prepared to find clear error on the Court of Federal Claims factual finding on all three elements, that should be affirmed.

[00:18:21] Speaker 01:
As Sufi has tried to do, they've sort of tried to re-characterize, because they don't want to go element by element, they try and sort of re-characterize the court's opinion as sort

[00:18:31] Speaker 01:
Just saying that attorney's fees are special, but clearly that's not what the court did.

[00:18:36] Speaker 01:
It laid out the elements.

[00:18:37] Speaker 01:
It went through each element.

[00:18:40] Speaker 01:
Sufi also tries to re-characterize this court's last opinion, in this case on appeal, as holding that a party that only does negligible work must be entitled to overhead profit.

[00:18:52] Speaker 01:
We don't think that's what this court said at all.

[00:18:55] Speaker 01:
And that part of the opinion is at JA 29.

[00:19:01] Speaker 01:
The other point that counsel made with regards to there was a sort of presentation that we didn't have the opportunity to present sort of our evidence.

[00:19:10] Speaker 01:
That is absolutely not the case.

[00:19:12] Speaker 01:
They may have some additional evidence that they wanted to produce now.

[00:19:15] Speaker 01:
Apparently, they want to put on expert testimony with regards to supporting their overhead or profit aspect of it.

[00:19:20] Speaker 01:
But we had a trial.

[00:19:22] Speaker 01:
And at that trial, they put on evidence about all the things that supposedly warranted a award of overhead and profit

[00:19:31] Speaker 01:
for, on these claim preparation attorney's fees.

[00:19:34] Speaker 01:
And let's be very clear, that is all that they're seeking here.

[00:19:37] Speaker 01:
This is $180,000 in overhead and profit on claim preparation attorney's fees.

[00:19:44] Speaker 02:
Well, wait a minute, John.

[00:19:45] Speaker 02:
If we let them put an expert on, are they entitled to interest on the overhead on paying the expert?

[00:19:55] Speaker 01:
Your honor, having dealt with Sufi a long time, I presume that that would come into play.

[00:20:02] Speaker 05:
Maybe tiny Sufi.

[00:20:03] Speaker 01:
Yes, maybe miniscule Sufi.

[00:20:05] Speaker 01:
I'm not sure, your honor.

[00:20:09] Speaker 01:
So that's my point with that, though.

[00:20:11] Speaker 01:
The idea that somehow they didn't have an idea.

[00:20:14] Speaker 01:
This is going to be largely the same evidence.

[00:20:16] Speaker 01:
There may be some additional evidence with regards to the expert if the record were allowed to be reopened.

[00:20:21] Speaker 01:
But the bulk of the evidence, the trial court judge sat there in the same trial that we were at for two days and listened to the testimony of the individuals.

[00:20:31] Speaker 01:
With that, barring any questions, I'll turn to the equitable estoppel argument.

[00:20:38] Speaker 01:
Sufi is subject to equitable estoppel because it asserted only its lodestar method before the contracting officer, before the court of federal claims and its complaint, on summary judgment, and during pretrial and at trial.

[00:20:49] Speaker 01:
Finally, before this court, Sufi raised only its lodestar award, and the Court of Federal Claim was affirmed.

[00:20:57] Speaker 01:
We relied on all these presentations, and we would certainly be injured if Sufi were now allowed to assert variant facts.

[00:21:04] Speaker 05:
Just curious, how would you be injured other than having to pay like more money?

[00:21:08] Speaker 01:
Well, the injury in many ways, Your Honor, has already occurred.

[00:21:12] Speaker 01:
Because what happened is that under a contingent fee,

[00:21:15] Speaker 01:
obviously we would have been arguing different numbers and numbers that we would not have had to argue would have been the reasonableness of the hours and the reasonableness of the hourly rate.

[00:21:26] Speaker 01:
We've now put on vigorous and expensive, ultimately not prevailing, but we put on vigorous and expensive defenses on those points and if the contingent was in fact what they had

[00:21:38] Speaker 01:
uh... sought to recover the entire time on but you know it wasn't an alternative then we wouldn't have had to do that have you got contingency fee arrangement yet copy of it no your honor uh... and uh... so so sort of set stemming off of that i i think i think what's very clear here is is the timing of units if he is presenting this as you know change in the law change in the evidence let me do a change in the law very quickly obviously the the uh... you know the the judge wrote the opinion sitting on this panel

[00:22:07] Speaker 01:
And I think that this panel or any panel can certainly interpret whether or not this court, in its opinion, based on sentences spanning about four pages in the opinion, one dealing with the underlying attorney's fees and one dealing with the overhead profit, that this court, in fact, meant to affect a sea change in how attorney's fees are recovered.

[00:22:30] Speaker 01:
And that, in fact, despite all the law that Sufi cited and presented to the Court of Federal Claims,

[00:22:35] Speaker 01:
despite all that, that in fact this court meant to say, oh, wait a minute, actually, actual damages, contingent fee.

[00:22:42] Speaker 01:
I don't think that was this court's interpretation at all.

[00:22:45] Speaker 01:
And I don't think any panel of this court would interpret the opinion that way.

[00:22:50] Speaker 01:
But the other point that I would like to make is with regards to timing.

[00:22:55] Speaker 01:
The idea, Sufi is shrouding this sort of in the idea that, well, there was a change in the law.

[00:22:59] Speaker 01:
I've already talked about that.

[00:23:01] Speaker 01:
There was a change in the facts.

[00:23:03] Speaker 01:
and on the issue of whether or not there was a change in the facts, we don't see the change in the quantum of the award to be a change in the facts.

[00:23:10] Speaker 01:
As some questions have already indicated, they could have made this argument at any step along the way.

[00:23:16] Speaker 01:
We didn't need a number tied to it in order for them to assert the argument that, hey, we want this or this.

[00:23:26] Speaker 01:
The timing is quite clear.

[00:23:27] Speaker 01:
Before, the lodestar method was more.

[00:23:32] Speaker 01:
Now, the lodestar method is less.

[00:23:36] Speaker 01:
And that's essentially all the court needs to know with regards to timing.

[00:23:42] Speaker 01:
I guess the last point I'll touch on with regards to the equitable stoppable is that the Court of Federal Claims finding could be alternatively upheld based upon waiver, an argument we raised below.

[00:23:51] Speaker 01:
Sufi waged its contingent fee damages theory at trial, and such waiver places Sufi's lodestar award within the scope of the Court of Federal Claims initial judgment

[00:24:00] Speaker 01:
and not subject to revision under the mandate rule.

[00:24:03] Speaker 01:
Sufi's argument that footnote 21, the argument counsel made was that their brief referenced this.

[00:24:10] Speaker 01:
Oh, it very much was a reference.

[00:24:11] Speaker 01:
It was in a footnote.

[00:24:12] Speaker 01:
It was not a developed argument.

[00:24:14] Speaker 01:
It is absolutely not a preserved argument that they sort of proffered this contingency.

[00:24:20] Speaker 01:
And that's in plaintiff's brief 14, note 6.

[00:24:24] Speaker 01:
It's unavailing because clearly that footnote did not raise, let alone develop its contingent fee damages theory.

[00:24:30] Speaker 01:
And even if not waived before the Court of Federal Claims, such argument was certainly waived before this court, as it was not raised in Sufi's opening appellate brief.

[00:24:38] Speaker 01:
Sufi hasn't twice intentionally relinquished or abandoned a known right.

[00:24:43] Speaker 01:
Therefore, barring any questions from the court, for all the reasons presented today and in our response brief, we respectfully request the Court of Federal Claims to speak.

[00:24:51] Speaker 00:
What's your view just generally

[00:24:55] Speaker 00:
The issue that's presented to us of profit and overhead related to attorney's fees incurred by an outside law firm.

[00:25:05] Speaker 00:
As a former partner and managing director of a law firm, I never had a client look at us as a profit center.

[00:25:16] Speaker 00:
As they pay us fees and therefore they tie some sort of profit into that.

[00:25:21] Speaker 00:
How do you make the profit argument that's being put out by Sufi?

[00:25:25] Speaker 01:
Well, Your Honor, and while I think that is a part of the basis of the opinion below, I don't think that's all of it.

[00:25:34] Speaker 01:
I mean, I think your gut instinct is correct.

[00:25:36] Speaker 01:
Typically, outside counsel is not sort of a profit center.

[00:25:40] Speaker 01:
And I think that the Court of Federal Claims was well-grounded in its foreseeability analysis.

[00:25:45] Speaker 00:
No, they're not.

[00:25:47] Speaker 01:
They're a cost center.

[00:25:51] Speaker 01:
Exactly, Your Honor.

[00:25:52] Speaker 01:
But Sufi's view is that

[00:25:54] Speaker 01:
They're a they're a cost, you know, just like just like any other cost but sort of what that view hinges upon is an Apparent what they think is an inability by the fact finger to really look at the actual costs and differentiate between them There's a big difference between a Sufi employee who's working on a claim and that Sufi has direct build and

[00:26:15] Speaker 01:
And that Sufi sought overhead and profit on and was not allowed to get overhead because they didn't prove it up before the board.

[00:26:22] Speaker 01:
This court affirmed that.

[00:26:23] Speaker 01:
They were given profit.

[00:26:24] Speaker 01:
There is a big difference between that $40 an hour Sufi employee and an attorney that's billing $500 an hour.

[00:26:33] Speaker 01:
And there's just not an expectation of the amount of oversight.

[00:26:38] Speaker 01:
Now Sufi wants to sort of whitewash all of that and say that no,

[00:26:42] Speaker 00:
uh... you know this is this is a cost and this is a cost and we get overhead profit on all our costs and here this case doesn't even involve the two scenarios you point out it seems to me this case involves you have a four hundred dollar an hour lawyer or an associate of a law firm that expensed time putting together their building records and everything to claim attorney's fees and then Sufi claiming those costs

[00:27:08] Speaker 00:
as lost profit and overhead, claiming that?

[00:27:12] Speaker 01:
Yes, Your Honor.

[00:27:13] Speaker 01:
Let's be clear, though.

[00:27:15] Speaker 01:
What Sufi was compiling was their claim.

[00:27:18] Speaker 01:
And that's why this is limited to strictly claim preparation attorney's fees.

[00:27:23] Speaker 01:
And we don't dispute that their attorneys spent time preparing their claim.

[00:27:28] Speaker 01:
Obviously, at this point, we're down to a very narrow part of that.

[00:27:31] Speaker 01:
We're down to the overhead and profit aspect of that.

[00:27:34] Speaker 01:
And sort of the gut reaction that you're having that this is not something that would normally be overhead profit, I think that's correct.

[00:27:44] Speaker 01:
Now, is there a case out there saying that it cannot be?

[00:27:47] Speaker 01:
I don't think that's the case.

[00:27:49] Speaker 01:
I think you have to go through the analysis.

[00:27:51] Speaker 01:
And I think that the court went through the analysis in this case.

[00:27:53] Speaker 01:
And when the court went through the analysis, it was able to see a difference in all of the elements under the common law recovery on these types of charges,

[00:28:04] Speaker 01:
Versus as opposed to a you know regular Sufi employee who's getting sort of documents together out of the file a Sufi employee And the reason I the reason I draw that distinction is because Sufi's recovered those amounts Sufi's recovered

[00:28:17] Speaker 01:
In its 30 claims, it had amounts in each claim for the Sufi employee that worked on that.

[00:28:23] Speaker 00:
But it also recovered the fees of the outside counsel spent on working this claim.

[00:28:28] Speaker 00:
Yes, Your Honor.

[00:28:29] Speaker 00:
Right?

[00:28:29] Speaker 00:
Yes, Your Honor.

[00:28:30] Speaker 00:
Almost 28 different breach contract claims.

[00:28:33] Speaker 00:
Yes, Your Honor.

[00:28:34] Speaker 00:
So what is it that's left here in terms of attorney's fees?

[00:28:38] Speaker 01:
Well, there's nothing.

[00:28:39] Speaker 00:
The fees that they've incurred in compiling together their hourly records and things of that nature to come up with attorney's fees.

[00:28:48] Speaker 01:
That may be left, Your Honor, and that case may be coming, but that's not what's at issue here.

[00:28:53] Speaker 01:
That's not what's at issue here.

[00:28:55] Speaker 05:
So just so I understand, I think I share the room's gut instinct about getting lost profits or a lost profit kicker on the attorney's fees.

[00:29:06] Speaker 05:
But what about the overhead in terms of the labor that a Sufi employee undertook to assist the lawyer in order to prepare the claim?

[00:29:17] Speaker 05:
Are you saying that that was already recovered or attempted to be recovered in a different Sufi litigation, maybe a big Sufi, maybe a little Sufi?

[00:29:27] Speaker 01:
The answer to your question is yes, Your Honor, but I want to be perfectly clear.

[00:29:30] Speaker 01:
Those were different fees.

[00:29:31] Speaker 01:
I'm not trying to say that Sufi is seeking a double recovery.

[00:29:34] Speaker 01:
I'm not saying that.

[00:29:35] Speaker 01:
All I'm saying is that they are now seeking overhead on their attorneys.

[00:29:38] Speaker 01:
And I think that to the extent that

[00:29:41] Speaker 01:
they could satisfy all the elements and prove that up, then it could be awarded.

[00:29:46] Speaker 00:
They're seeking overhead on their outside counsel.

[00:29:49] Speaker 00:
Yeah, sure.

[00:29:49] Speaker 00:
Not their attorneys.

[00:29:51] Speaker 00:
Not their in-house counsel.

[00:29:52] Speaker 01:
Right.

[00:29:52] Speaker 01:
There is no in-house counsel, Your Honor.

[00:29:54] Speaker 01:
So I'm sorry.

[00:29:54] Speaker 01:
I'm using those phrases interchangeably.

[00:29:57] Speaker 01:
One would expect that that's built into the fees.

[00:30:02] Speaker 01:
Yeah, sure.

[00:30:05] Speaker 01:
So I guess the... I'll leave it at that.

[00:30:08] Speaker ?:
Thank you.

[00:30:12] Speaker 00:
You have three minutes, Mr. McCormick.

[00:30:14] Speaker 00:
Thank you, Your Honor.

[00:30:16] Speaker 04:
First, quickly on overhead and profit, I want to make clear that here, again, this is not a fee-shifting statute about attorney's fees here.

[00:30:25] Speaker 04:
We're under the common law.

[00:30:28] Speaker 04:
And when it's a non-litigation purpose, the fact that an attorney does it versus an employee or a consultant makes no difference under the law.

[00:30:36] Speaker 04:
You're entitled to the actual cost.

[00:30:39] Speaker 04:
And so the fee that is charged to the client, to the plaintiff, is their cost.

[00:30:46] Speaker 04:
And the law says you're entitled.

[00:30:48] Speaker 05:
What's your theory on lost profits?

[00:30:50] Speaker 05:
Because I just pretend for a moment that I don't get it.

[00:30:54] Speaker 05:
So can you explain to me how you are entitled to some kind of lost profits kicker based on the fees that were collected by the law firm?

[00:31:04] Speaker 04:
That's what the Federal Circuit says under energy and other case law that a party is able to recover when they have a breach.

[00:31:14] Speaker 04:
They're entitled to recover their indirect costs, which includes a profit.

[00:31:19] Speaker 04:
Even the FAR clauses envision that.

[00:31:22] Speaker 04:
profit would be added.

[00:31:24] Speaker 05:
It's the labor of someone that's completely outside of the company.

[00:31:27] Speaker 05:
It's the labor of attorneys that are in an outside law firm that Sufi wants to say it wants to collect profits on.

[00:31:36] Speaker 05:
That's what I don't understand.

[00:31:38] Speaker 04:
I understand that, but I think we've cited a few cases like Allied Materials in our briefs in which that award was exactly made.

[00:31:45] Speaker 04:
A legal fee for outside counsel

[00:31:48] Speaker 04:
was those fees were recovered because they were non-litigation fees and they were burdened with overhead and profit in that case.

[00:31:56] Speaker 04:
So we have support for that.

[00:31:58] Speaker 04:
I don't think it matters that it's an outside counsel.

[00:32:01] Speaker 04:
I also just wanted to say that we're not saying that the common law doesn't have a foreseeability analysis, but the court already made that analysis regarding the claim of operation fees.

[00:32:11] Speaker 04:
I wanted to take it, if your honor might permit me, just two extra minutes on the actual cost issue.

[00:32:18] Speaker 04:
I'll give you an extra minute so you can wind up.

[00:32:21] Speaker 04:
Okay, the issue on whether there's an injury or not to the government, you know, is the equitable estoppel analysis is overcome by the fact that we're seeking an exception to the mandate.

[00:32:32] Speaker 04:
And we think we've provided that given the significant change in the evidence, namely what Sufi has to pay in its contingency arrangement, what its actual costs are, and the intervening decision, which is this case.

[00:32:43] Speaker 04:
And I wanted to note there that

[00:32:45] Speaker 04:
Uh, we did proceed originally under the lodestar, however, uh, and the government accepted that, but it was then the government that, uh, that changed the game.

[00:32:54] Speaker 04:
The government is the one who made the first appeal.

[00:32:57] Speaker 04:
We didn't appeal.

[00:32:58] Speaker 04:
They did.

[00:32:58] Speaker 04:
And in their appeal, they challenged the lodestar application, uh, to the calculation of interest.

[00:33:05] Speaker 04:
They said, no, you shouldn't calculate it based on the lodestar because Sufi has a contingency agreement.

[00:33:10] Speaker 04:
And we had noted then before the trial court,

[00:33:13] Speaker 04:
that if the government wants to calculate it that way, well, then they can't have their cake and eat it too.

[00:33:17] Speaker 04:
They can't have it both ways.

[00:33:19] Speaker 04:
Well, then we should do the actual fees based on our contingency as well.

[00:33:23] Speaker 04:
And when this court agreed with the government on interest, it changed the law.

[00:33:28] Speaker 04:
Thank you.

[00:33:29] Speaker 04:
All right.

[00:33:29] Speaker 04:
Thank you very much.

[00:33:30] Speaker 00:
Court stands in recess.

[00:33:37] Speaker 05:
All rise.

[00:33:39] Speaker 05:
The Honorable Court is adjourned until tomorrow morning at 10 AM.