SDVOSB recovers attorneys’ fees against the VA. Miles Construction previously prevailed in a protest involving CVE’s denial of its SDVOSB verification. CVE denied verification because Miles Construction’s Operating Agreement contained a Right of First Refusal clause. The court held this did not violate the “unconditional ownership” requirement found in the VA’s SDVOSB regulations.
Miles Construction subsequently filed an action for attorney’s fees. The Court agreed that the VA’s position was not substantially justified and awarded fees to Miles Construction. Miles Construction, LLC v. United States, No. 12-597C (2013) In doing so, the Court noted that the VA’s SDVOSB regulations regarding unconditional ownership differ from the SBA’s SDVOSB regulations on this issue. It was therefore wrong for the VA to rely on SBA case law when denying verification based on the Right of First Refusal clause.
The Court noted that SBA’s SDVOSB ownership regulation uses the term “unconditional ownership” without explanation or qualification. The VA’s SDVOSB ownership regulation however, “contains an extended explanation of ‘unconditional ownership’” that “substantially alters ‘unconditional’ to accommodate practical commercial arrangements while preventing ownership benefits from falling into the hands of non-veterans.” Hopefully, CVE will be guided by this ruling and avoid denials of verification based on “practical commercial arrangements” typically found in bylaws or operating agreements.
