Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_04-cv-01297/USCOURTS-caed-2_04-cv-01297-8/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1441 Petition for Removal- Account Receivable

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1

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

IMPRIMIS INTERNATIONAL, INC.,

Plaintiff,

v. NO. CIV. S-04-1297 FCD DAD

FINDINGS OF FACT AND 

CONCLUSIONS OF LAW

ROBERT B. FRAIDENBURGH, 

Defendant.

___________________________/

----oo0oo----

On March 16, 2004, plaintiff Imprimis International, Inc.

(“Imprimis”) filed a Motion for Judgment in the Circuit Court for

the City of Alexandria, Virginia, against defendant Robert B.

Fraidenburgh (“Fraidenburgh”) arising out of on an alleged breach

of contract. Subsequently, the case was removed to the Eastern

District of Virginia on the basis of diversity jurisdiction and

transferred to the Eastern District of California pursuant to 28

U.S.C. § 1404. Plaintiff alleges (1) that it entered into an

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1 The parties originally filed proposed Findings of Fact

and Conclusions of Law on March 29, 2007 and April 2, 2007,

bereft of any citation to the official trial transcript and any

discussion of contract law. After review of these filings, on

April 3, 2007, the court directed the parties to file

Supplemental proposed Findings of Fact and Conclusions of Law. 

(Minute Order, Docket # 78, filed April 30, 2007). After the

court granted defendant’s request for an extension of time, the

parties’ amended briefs were filed on May 11 and May 14, 2007. 

Plaintiff’s amended filing was not only untimely, but is

substantially unchanged from the original filing. However, for

the purpose of completeness, the court will consider plaintiff’s

untimely filing. 

2

agreement with defendant Fraidenburgh, doing business as Sunrise

Precision; (2) that plaintiff performed all services,

stipulations, conditions, and agreements as set forth in the

contract; and (3) that defendant failed to pay the money owed

plaintiff under the contract. Defendant asserts that the

contract was illegal and unenforceable. Alternatively, defendant

contends that plaintiff is entitled to receive only partial

payment under the contract because the applicability of the

doctrine of frustration of purpose and/or because of plaintiff’s

non-performance of contractual obligations. 

The court held a bench trial on February 27-28, 2007, at

which Ben Hord (“Hord”), the president of plaintiff Imprimis, and

defendant Fraidenburgh were the sole witnesses. Considering the

evidence presented therein and the parties’ written submissions

thereafter, the court enters the following findings of fact and

conclusions of law pursuant to Federal Rule of Civil Procedure

52(a).1

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2 To the extent that any of the court’s findings of fact

may be considered conclusions of law or vice versa, they are to

be considered as such.

3 All citations to “TX ___” are to the Trial Transcript

of the bench trial. All citations infra to “TT ___” are to the

exhibits admitted into evidence during the trial. At trial, due

to the apparent and utter disorganization of both parties’

counsel, the exhibits were at times referred to by more than one

number. These exhibits were later submitted to the court without

any further organization or proper labels. All exhibits

submitted to the court are joint exhibits by stipulation of the

parties. However, the majority, though not all, of the exhibits

are marked with “plaintiffs exhibit” stickers. The court will

refer to the numbers on these stickers on the documents submitted

to the court, unless otherwise noted. 

4 Pursuant to Federal Rule of Civil Procedure Rule 16(e)

and Local Rule 16-283, the Final Pretrial Order controls the

subsequent course of the action. One purpose of the Final

Pretrial Conference Order is “to promote efficiency and conserve

judicial resources by identifying litigable issues prior to

trial.” Portsmouth Square, Inc. v. Shareholders Protective

Comm., 770 F.2d 866, 869 (9th Cir. 1985). While both parties

proffered evidence at trial that seemingly sought to dispute the

previously undisputed facts set forth in the Final Pretrial

Conference Order, neither party moved to amend the order or

demonstrated good cause for such amendment. See Fed. R. Civ.

Proc. 16. As such, the undisputed facts, as set forth by the

parties in their joint final pretrial report (Docket # 65) and

incorporated in the court’s Final Pretrial Conference Order

(Docket # 69), are binding and controlling. See United States v.

First. Nat’l Bank of Circle, 652 F.2d 882, 886 (9th Cir. 1981)

(“[A] party need offer no proof at trial as to matters agreed to

in the order, nor may a party offer evidence or advance theorems

at the trial which are not included in the order or which

3

FINDINGS OF FACT2

The parties entered into a contract for professional

services, (TX 65),3 which provides for a contingency fee

arrangement, wherein plaintiff Imprimis would be paid out of

funds received by defendant as the result of defendant receiving

either a contract or a subcontract for the development and

production of a device that would be used in a naval defense

system. (Final Pretrial Conference Order, Docket # 69, filed

Nov. 15, 2006, Undisputed Fact ¶¶ 1-2).4 The contract required

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28 contradict its terms.”). 

4

plaintiff to perform certain management services on behalf of

defendant, as well as assisting defendant to obtain funds already

appropriated but not allocated to a Navy contracting office or

government contract. (Id., Undisputed Fact ¶ 3). The contract

further provided that plaintiff would assist defendant over a

period of four separate and distinct phases. (Id., Undisputed

Fact ¶ 4). Plaintiff provided services to defendant during the

first phase by locating the appropriated funds and by assisting

the Navy to transfer those funds. (Id., Undisputed Fact ¶ 5). 

Plaintiff did not perform on phases 2-4 of the October 3, 2002

Agreement for reasons disputed between the parties. (Id.,

Undisputed Fact ¶ 6).

Plaintiff Imprimis is a management consultation firm,

focusing most of its business on issues related to federal

appropriations and the Department of Defense. (TT 5:21-25). 

Principally, plaintiff is in the proposal preparation business,

but it also provides general and financial management for its

clients. (TT 5:17-20). Hord, the president of Imprimis, has

over twenty years of experience in this business. (TT 5:13-14). 

Defendant Fraidenburgh is a citizen and resident of the

State of California, who at one time did business as Sunrise

Precision. (Def.’s Am. Answer, Docket # 43, filed Feb. 3, 2006,

¶ 2). Defendant sought to become a second source for the Navy of

circuits for traveling wave tubes (“TWTs”), a component necessary

for the radar energy surrounding cruisers and warships. (TT

208:19-25; 209:11-24; 215:6-11). TWTs were manufactured by

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5 Defendant testified that the first attempt to become a

secondary source failed as a result of bad raw materials. (TT

212:9-213:13). 

5

Teledyne, where defendant had previously been employed as a

manufacturer of parts for TWTS. (TT 208:13-25). After defendant

left Teledyne, he later approached the program manager at

Teledyne, who welcomed the idea of having defendant as a second

source of TWT parts. (TT 209:20-24). After suffering financial

hardship from a failed personally financed first attempt to

become a second source,5 defendant traveled to Washington, D.C.

to speak to a Congressman about the issue in order to obtain

government funding. (TT 213:14-16; 214:19-215:2). Subsequently,

Congress appropriated one million dollars for this project. (TT

8:1-6; 215:15-25). Defendant had never before dealt on his own

with the governmental procedures of obtaining government contract

funds. (TT 220:13-17). Therefore, he contacted Townsend Van

Fleet, a registered lobbyist and a friend of defendant’s friend,

for help locating the appropriated funds in the budget. (TT

10:13-18; 218:2-22). Van Fleet advised defendant that he was

going to need a proposal writer and referred defendant to

plaintiff Imprimis and Hord. (TT 218:24-219:4).

Fraidenburgh first contacted Hord in or about May 2002. (TT

11:12-13). Defendant informed Hord about his experience in the

field and his first failed attempt at becoming a secondary

source. (TT 219:12-13). In or about June 2002, Hord met with

defendant and engineers from Teledyne. (TT 11:12-12:12). Hord

confirmed with Jim Trudel (“Trudel”), a manager at Teledyne, that

Teledyne would support defendant’s company as a second source if

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the appropriated funds could be found and directed toward this

project. At that point, plaintiff and defendant entered into a

verbal agreement with the understanding that a written agreement

would be forthcoming with the effective date of June 5, 2002. 

(TT 16:19-23).

Subsequently, Hord began trying to locate the funds that had

been appropriated for defendant’s project. (TT 12:24-13:12). 

Hord was concerned that if the money was not found, it would go

into the Navy’s general fund at the end of the fiscal year on

October 1, 2002. (TT 9:8-14). Hord knew that the money had been

appropriated because it had a line and a name in the government

appropriations and authorization bill, but he was having

difficult actually obtaining the money for the project. (TT

13:14-22). In or around August 2002, Hord located the office

where the money was. (TT 13:20-25). Subsequently, in or around

September 2002, Dick Flaherty (“Flaherty”) and Hord from Imprimis

had a meeting at the Naval yard in Washington, D.C. with

representatives from the Naval base in Crane, Indiana and from

the program office in Washington, D.C. (TT 14:2-20). At this

five to six hour meeting, it was determined that the one million

dollars had mistakenly been put into another program, for which

it was not allocated, and that $80,000 of it had been used. (TT

14:21-25). Hord and Flaherty discussed how the money could be

appropriately redirected to defendant’s second source project. 

(TT 15:1-10). It was determined that the Navy could get a

purchase order for $100,000 in order for defendant to begin the

project and then create a more in-depth engineering and services

contract with defendant for the remainder of the appropriated

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funds. (TT 15:11-21). Thereafter, defendant’s proposal to be a

second source for TWT materials was put on the agenda of a

regularly scheduled meeting between Teledyne and Crane Naval

Depot at Teledyne’s offices in California in October 2002. (TT

224:11-23).

Between August and October 2002, plaintiff and defendant

worked together to plan how defendant’s project would be

implemented and what it would cost, in order to justify such

expenses to the government. (TT 88:15-20; 89:3). Defendant

submitted a list of what he believed was needed for the project

and the anticipated costs and Hord gave him notes and proposed

modifications. (TT 89:9-14; TX 62-64). Plaintiff and defendant

also prepared a document setting forth the proposed timeline for

the implementation of the project, from pre-award activities

through Phase II Engineering. (TX 7, 69). Hord referred to this

as the program object agreement and memorandum (“POA&M”)

document. (TT 99:6-9). 

In mid-October 2002, prior to the meeting at Teledyne,

plaintiff and defendant executed a formal written contract for

plaintiff’s services, which had been prepared by plaintiff. (TT

158:19-24; 248:14-17). The contract set forth generally that

Imprimis would provide services to Sunrise Precision, including

(1) locating and identifying “the monies earmarked to ‘enable

Aegis System (TWT) to be made from competitive US molybdenum

suppliers’”; (2) preparing and submitting a proposal “to the

Government (through Teledyne Electronic Technologies, Rancho

Cordova, California) US Navy” in POA&M format; (3) providing

managerial support, financial management, and contractual

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guidance; (4) assisting Sunrise Precision in obtaining follow-on

monies; and (5) supporting Sunrise Precision during the continued

multi-year effort. (TX 65). The contract outlined that the term

of payments to Imprimis “is based on the concept of performance

on the contract,” which was divided into four phases with

specific duties enumerated under each. (Id.) Phase 1 is

described as “Planning and Preparation.” (Id.) During this

phase, Imprimis was to (1) “assist Sunrise Precision in

establishing an entity to perform on the contract”; (2) “provide

the guidance and direction to Sunrise Precision”; (3) act as a

“management liaison” between the Navy and Sunrise Precision; (4)

“monitor the formation of an accounting system”; and (5)

“complete the program plan for Sunrise Precision.” (Id. at

Enclosure 1-1). This phase was expected to be performed within 4

months with the rate of compensation for plaintiff set at $4000

per month. (Id.) Phase 2 is described as Engineering Design and

Initial Production, during which Imprimis agreed to provide

continuous guidance and direction to defendant’s management team,

monitor financial management and contractual requirements,

provide the liaison and interface with the Navy and Teledyne, and

assist in obtaining the additional plus-up from Congress to

complete the required tasks. (Id.) Phase 3 was described as

Certification, and Phase 4 was described as Tungsten

Certification. (Id. at Enclosure 1-2). The contract also

memorialized that while the Agreement was formally executed by

plaintiff on October 13, 2002 and by defendant on October 17,

2002, the Agreement actually commenced on or about June 5, 2002,

the “Effective Date.” (TX 65).

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6 At trial, defendant expressed dissatisfaction with the

Power Point presentation primarily because of the prevalence of

Imprimis’ logo throughout the presentation. (TT 227:3-16). Such

belatedly expressed dissatisfaction is irrelevant to the inquiry

before this court. There is no dispute that Hord gave the

presentation at the October meeting. 

9

At the meeting in late October 2002, defendant and

representatives from Crane Naval Depot, Teledyne, and Imprimis

discussed defendant’s second source proposal. (TT 40:21-41:11;

225:7-14). Hord gave a Power Point presentation. (TT 41:17-25;

225:17-18). The presentation set forth in narrative form the

program background, the program objectives, the proposed timeline

for the implementation of the program, and the proposed approach. 

(TX 20).6 The technical information included in the presentation

was supplied by defendant, the Navy, and Trudel. (TT 134:8-13;

226:12-19). After Hord’s Power Point presentation, a

representative from Teledyne, Mike Baker, gave a presentation

setting forth what Teledyne would require to be the prime

contractor on the project. (TT 228:2-10). Thereafter, defendant

gave a technical presentation for which he brought in a prototype

of a TWT part that he had previously made. (228:13-23). The

Navy agreed to the proposal, with Teledyne acting as the prime

contractor and defendant acting as the subcontractor. (TT

228:9).

In January 2003, defendant received a purchase order from

Teledyne in the amount of $100,000 to begin the project. (TX 61;

TT 235:15-236:9). This was a result of a Statement of Work

executed between defendant and Teledyne. (Id.) There is no

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7 Hord testified that the Statement of Work was virtually

identical to the POA&M. The court’s review of these documents

contradicts this testimony. Not only do the “milestones” fail to

coincide, but such objectives are phrased in very general terms

on both documents. (Compare TX 7 with TX 61). As such, there is

no evidence that the POA&M drafted by Hord and Imprimis had any

effect on subsequent proposals.

10

evidence that Hord or plaintiff helped with the preparation of

this document.7 

After the October 2002 meeting, the relationship between

plaintiff and defendant began to deteriorate. Defendant had

difficulty contacting Hord or plaintiff. (TT 249:23-25). 

Defendant continued to e-mail plaintiff with information and

status reports. (TT 249:23-250:9). Plaintiff’s responses were

sporadic and often unintelligible. (TT 250:3-9; see e.g., TX 68,

77). Hord admitted that there was a hiatus in communication

between January and March 2003. (TT 119:13-15). In February

2003, defendant incorporated the entity that would perform on the

subcontract, Optimet Corporation, with the help of his attorney,

Frank Radoslovich. (TT 242:18-243:9). In March 2003, Hord told

defendant that he was in Florida working for another client. (TT

251:21-23). When defendant expressed concern about the project,

Hord stated that defendant did not need him to actually write a

proposal because defendant’s relationship with Teledyne was so

good that it would carry the project through. (TT 251:22-252:1). 

In fact, plaintiff did not write the Statement of Work for the

remainder of the funds. (TT 178:14-20; TX 46). Rather, Teledyne

drafted the Statement of Work with input from defendant. (TT

178:20; 253:1-2). Hord did not see this document, dated March

14, 2004, until his deposition was taken in the course of this

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litigation. (TT 172:21-24; TX 46). Hord contends that this

document was crafted from information that he had previously

drafted with defendant. (TT 172:7-20). However, none of the

documents drafted by plaintiff, including the Power Point

presentation or the POA&M document, nor the conclusory and selfserving testimony of Hord demonstrate that the Statement of Work

was merely a rephrasing of plaintiff’s information or prior workproduct. (Compare TX 46 with TX 20, 7, 69). 

On April 22, 2003, defendant sent an e-mail to Hord, seeking

to modify the terms of the contract because Teledyne had stepped

into the role of proposal writer and project manager, which had

been plaintiff’s role under the contract. (TX 50). In May 2003,

Hord and defendant met at defendant’s attorney’s office to

discuss the contract. (TT 258:7-24). There was heated

discussion regarding defendant’s position that plaintiff had not

performed fully under the contract and thus, was not owed the

amount it sought. (TT 259:4-12). Finally, on or about August

24, 2003, defendant had a conference call at Teledyne with

representatives from Teledyne and Crane Naval Depot during which

the proposal was reviewed and the representatives from Crane

Naval Depot told defendant that Hord should not receive any of

the money allocated to the project. (TT 262:11-25). 

Subsequently, on August 25, 2003, defendant sent an e-mail to

Hord, informing him that defendant was instructed by the

representatives from Crane that none of the funding could pay for

plaintiff’s services. (TX 92). The e-mail also gave Hord the

name and telephone number of defendant’s attorney and stated that

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defendant would be relying on his attorney for advice in the

matter. (TX 92).

Defendant has not paid plaintiff any fees under the

contract. (TT 265:3-266:6). Defendant has not reimbursed

plaintiff for any out of pocket expenses advanced or incurred by

plaintiff in connection with the contract. (TT 265:3-266:6). 

Plaintiff seeks damages in the amount of $117,000, the amount

that it believes will compensate it for the services actually

performed under the contract. (TT 164:13-165:1). Plaintiff also

seeks reimbursement for out of pocket expenses incurred in

performance of the contract. (TX 2-4). 

CONCLUSIONS OF LAW

Plaintiff Imprimis has filed this action based upon its

contention that defendant Fraidenburgh breached their contract by

failing to pay for the professional services rendered by

plaintiff. This court has jurisdiction based upon the parties’

diversity of citizenship. Therefore, state law controls on all

substantive issues, including contractual interpretation issues. 

Sherman v. Mutual Benefit Life Ins. Co., 633 F.2d 782, 784 (9th

Cir. 1980). A district court sitting in diversity must apply the

choice of law rules of the forum state. Ledesma v. Jack Stewart

Produce, Inc., 816 F.2d 482, 484 (9th Cir. 1987). Although

explicitly directed by the court to do so, (Docket # 78), neither

party has set forth what state law they believe should apply to

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8 Despite the court’s explicit instruction to do so,

(Docket #78), plaintiff has failed to submit any argument

regarding contract law in its supplemental briefing. 

9 Defendant’s prior counsel, who filed the motion to

change venue pursuant to 28 U.S.C. § 1404 from the Eastern

District of Virginia to this court, conceded in his moving papers

that Virginia law applies to this action. 

13

this case nor have they consistently applied any one state’s law

in their discussion of contract principles.8 

The contract between the parties provides that the contract

“shall be governed by the State of Virginia.” (TX 65). Under

California law, absent the presence of strong public policy

requiring application of California law, the intention of the

parties to apply Virginia should govern. Consolidated Data

Terminals v. Applied Digital Data, 708 F.2d 385, 391 (9th Cir.

1983); see Haisten v. Grass Valley Med. Reimbursement Fund, 784

F.2d 1392, 1402 (9th Cir. 1986). Because the court is not aware

of any such strong public policy and because the parties have not

raised any argument whatsoever relating to choice of law, the

court will apply Virginia state contract law to the facts of this

case.9

1. Illegal and Unenforceable Contract

Defendant contends that the contract is illegal and

unenforceable because it required him to pay Hord federal funds

for influencing the Navy in connection with the award of a

federal contract, in violation of 31 U.S.C. § 1352. “Generally,

a contract based on an act forbidden by a statute is void and no

action will lie to enforce the contract.” Eure v. Jefferson

Nat’l Bank, 248 Va. 245, 252 (1994) (quoting Blick v. Marks,

Stokes and Harrison, 234 Va. 60, 64 (1987)). However, “the

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10 Because the case law interpreting § 1352 is sparse and

inapplicable to the facts of this case, the court finds

persuasive decisions relating to the enforceability of contracts

for personal services that have been challenged as illegal or

against public policy because they contemplate the use of

personal or political influence upon the government. 

14

illegal . . . nature of a contract for professional services will

not be presumed; the burden of proving the illegality of the

contract is clearly upon the party asserting it.” Troutman v. S.

Ry. Co., 441 F.2d 586, 589 (5th Cir. 1971) (holding that the

defendant failed to demonstrate that the employment contract at

issue was illegal as a contract to improperly influence a public

official in the exercise of his duties where the plaintiff’s

influence was used merely to obtain an audience with the

President to present the merits of the defendant’s position)

(citations omitted)10; see Steele v. Drummond, 275 U.S. 199, 205

(1927) (“Detriment to the public interest will not be presumed,

where nothing sinister or improper is done or contemplated.”). 

Section 1352 provides, in relevant part:

None of the funds appropriated by any Act may be

expended by the recipient of a Federal contract . . .

to pay any person for influencing or attempting to

influence an officer or employee of any agency . . . .

31 U.S.C. § 1352 (West 2007). The provisions of § 1352 also

apply to any person who receives a subcontract under a Federal

contract. 31 U.S.C. § 1352(b)(5). However, this limitation on

use of federal funds does not apply “if the payment is for

professional or technical services rendered directly in the

preparation, submission, or negotiation of any bid, proposal, or

application for that Federal contract . . . .” 31 U.S.C. §

1352(d)(1)(B).

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By its terms, the contract does not implicate the provisions

of § 1352. (TX 65). The contract contains no terms which call

for plaintiff to influence Congress or agency officials in

obtaining a federal contract. However, defendant argues that in

executing the contract, particularly in “locating and identifying

the monies,” Hord, on behalf of plaintiff Imprimis, influenced

“Navy brass” into diverting the already appropriated funds into

defendant’s project. In support of this contention, defendant

relies on admissions to him by Hord that he was going to contact

his “buddies” in Washington to make sure the money didn’t go

away. (TT 238:13-17). Defendant also contends that Hord stated

to him on several occasions that “[he] made the money come, [he]

could make it go away.” (TT 253:23-25). 

The court finds credible defendant’s testimony that Hord

made statements alluding to some inordinate amount of influence

he had over the allocation of federal funds. While such

statements are admissible, substantive evidence as admissions by

a party opponent, the court, as the trier of fact, must determine

the weight to give to such statements, considering the

circumstances under which they were made. The testimony of both

defendant and Hord reveal that defendant had no experience with

the governmental procedures of obtaining government contract

funds and that Hord had over twenty years of experience in this

area. (TT 5:13-14; 220:13-17). The evidence also demonstrated

that throughout the performance of the contract, Hord sought to

impress the weight of such expertise on defendant and make his

services appear both essential and invaluable to defendant’s

success in executing the project. This remained true even after

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11 Moreover, Hord’s statement that he would talk to his

“buddies” or “friends” regarding the funding does not necessarily

implicate “influence” within the meaning of § 1352. Any

influence based upon Hord’s personal relationship with Naval

officials may have been employed solely to gain access to the

appropriate individuals in order to present the merits of his

client’s case. See Troutman, 441 F.2d at 589 (citing Hall v.

Anderson, 18 Wash. 2d 625 (1943); Old Dominion Transp. Co. v.

Hamilton, 146 Va. 594 (1926)); see also Coyne, 80 F.2d at 847

(“There must be proof that something contrary to good morals was

contemplated or done.”).

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it became clear that Teledyne had stepped into the role of

project manager and proposal writer. (See TX 49). Defendant

testified that Hord’s admissions regarding making contact with

his “buddies” about the funding was made after the October 2002

meeting at Teledyne, when it was apparent that Teledyne would be

the prime contractor for the second source project. (TX 238:1-

24).11 Defendant further testified that Hord made statements

regarding making the money go away at several points after the

October 2002 meetings, including in May 2003 when defendant

expressed that he did not want to pay the money plaintiff

believed was due under the contract. (254:3-5; 259:13-15). The

court finds that these circumstances indicate that plaintiff’s

statements were made in an attempt to bolster his position in

defendant’s eyes and maintain the contractual relationship, which

was on tenuous ground. As such, Hord’s statements alluding to

his conduct and ability to influence Naval officials are

insufficient to demonstrate that plaintiff’s conduct in

performing under the contract violated § 1352 and rendered the

contract unenforceable.

Further, the court also finds credible Hord’s testimony that

he arranged a meeting with Naval officials in September 2002

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during which he confirmed and informed the officials that the

appropriated funds had been misdirected to a project that could

not use the funds and that defendant’s project could properly

utilize the appropriated funds. Hord’s conduct in locating the

appropriated funds and informing the Navy that they were

currently allocated to an improper project is properly

interpreted as a professional service rendered in preparation and

negotiation of defendant’s application for the federal

subcontract. See Trist v. Child, 88 U.S. 441 (1874) (drawing the

distinction between the use of personal influence to secure

legislation and legitimate professional services in making the

legislature acquainted with the merits of the measures desired). 

Such testimony also demonstrates that Hord presented the merits

of defendant’s proposal to the Naval officials. See Puma Indus.

Consulting, Inc. v. Daal Assocs., Inc., 808 F.2d 982, 984-85 (2d

Cir. 1985) (holding that contingent fee arrangement between the

defendant and the plaintiff, who assisted small businesses in

procuring contracts with the government, did not violate 41

U.S.C. § 254(a) or public policy because there was no hint that

the plaintiff was selling government interest, the harm that is

to be protected against); Coyne v. Superior Incinerator Co. of

Texas, 80 F.2d 844, 846-47 (2d Cir. 1936) (holding that the

contingent agreement with the plaintiff, who had a friendship

with a government official, was not illegal or unenforceable

where there was no evidence that the plaintiff did anything more

than use his connection to obtain and a hearing and then try to

sell the product on the merits); cf. Ewing v. Nat’l Airport

Corp., 115 F.2d 859, 860-61 (4th Cir. 1940) (declaring the

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12 While this affirmative defense was not pled in

defendant’s answer, for the sake of completeness, the court will

consider the applicability of this theory to the facts presented

at trial.

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contingency fee contract for professional services unenforceable

where the evidence of improper influence including letters in

which the plaintiff admitted that he promised senators to exert

political influence in their home states in return for their help

in passage of the legislation). As such, plaintiff’s conduct is

explicitly addressed by the exception for professional and

technical services set forth in § 1352. Therefore, the contract,

as performed by plaintiff, is not illegal or unenforceable.

2. Frustration of Purpose

Defendant also contends that the court should not enforce

the contract based upon the defense of frustration of purpose.12

The doctrine of frustration of purpose discharges a party from

its contractual obligations due to some supervening occurrence

which frustrates the party’s purpose in entering into the

contract. Coker Int’l, Inc. v. Burlington Indus., Inc., 935 F.2d

267 (4th Cir. 1991). 

Where, after a contract is made, a party’s principal

purpose is substantially frustrated without his fault

by the occurrence of an event the non-occurrence of

which was a basic assumption on which the contract was

made, his remaining duties to render performance are

discharged, unless the language or circumstances

indicate the contrary.

Restatement (Second) of Contracts § 265 (1979). Defendant

asserts that when Teledyne became the prime contractor for the

second source project and defendant became the subcontractor,

Phases 2-4 of the contract were commercially frustrated because

Teledyne was in charge of all dealings with the Navy. 

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Specifically, defendant asserts that plaintiff did not assist in

drafting the proposal submitted to the Navy because Teledyne

drafted the proposal.

Determination of the purpose of the contract is a matter of

contract interpretation. Virginia law respecting contract

interpretation is well settled. Bridgeston/Firestone, Inc. v.

Prince William Square Assocs., 250 Va. 402, 407 (1995). “When

contract terms are clear and unambiguous, a court must construe

them according to their plain meaning. Id. (citing Food First,

Inc. v. Gables Assocs., 244 Va. 180, 182 (1992); Winn v. Aleda

Const. Co., 227 Va. 304, 307 (1984)). “[A] court must construe

the words as written and not make a new contract for the

parties.” Id. (citing Berry v. Klinger, 225 Va. 201, 208

(1983)). Parol evidence may only be admitted to establish the

intention of the parties, and thus, the real contract between the

parties when the language of a contract is ambiguous. Tuomala v.

Regent Univ., 252 Va. 368, 374 (1996).

The contract between plaintiff and defendant provides that

plaintiff “Imprimis will provide Business Development and

Corporate Support to Sunrise Precision.” (TX 65). In addressing

plaintiff’s duties in drafting proposals for the Navy, the

contract explicitly provides that plaintiff will “[p]repare and

submit a proposal to the Government (through Teledyne Electronic

Technologies, Rancho Cordova, California) . . . containing the

appropriate plan in POA&M format.” (TX 65) (emphasis added). 

The contract also provided that plaintiff will provide support

and guidance “in support of the performance on the ensuing

contract/task orders/purchase orders from the Navy through

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Teledyne Electronic Technologies. (TX 65) (emphasis added). 

Moreover, under the “Terms and Conditions” of the contract, which

breakdown plaintiff’s explicit duties into the four phases, the

contract language consistently refers to Teledyne’s role in the

project and explicitly sets forth that the “Navy has agreed to

provide the remaining monies of the $1M plus up to Sunrise

Precision through Teledyne Electronics Technologies.” (TX 65 at

Enclosure 1-1). The court finds that it is clear from the

unambiguous terms of the contract that the parties contemplated

that Teledyne would be the prime contractor and that defendant

would be the subcontractor on the second source contract. 

Because defendant’s asserted “supervening occurrence” was

contemplated in the contract, the purpose of the contract was not

frustrated by an event, “the non-occurrence of which was a basic

assumption on which the contract was made.” See Restatement

(Second) of Contracts § 265. Therefore, the defense of

frustration of purpose does not apply to this case. 

3. Failure of Consideration/Performance

Defendant also asserts that the contract should not be

enforced because of failure of consideration. (See Def.’s Am.

Answer, Docket # 43, filed Feb. 3, 2006, at 2; Final Pretrial

Conference Order, Docket # 69, Disputed Facts ¶ 8). 

Specifically, defendant contends that any failure by defendant to

pay plaintiff’s fees under the contract described resulted from

plaintiff’s failure to perform the services required under the

contract.

What is sometimes referred to as a “failure of

consideration” by courts and statutes, is referred to by the

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Restatement (Second) of Contracts as “failure of performance. 

Restatement (Second) of Contracts § 237 comment a (2007); see

Citland, Ltd. v. Com. ex re. Kilgore, 45 Va. App. 268, 277 n.5

(2005) (citing § 237 of the Restatement (Second) of Contracts);

see also R.G. Pope Const. Co., Inc. v. Guard Rail of Roanoke,

Inc., 219 Va. 111, 119 (1978) (finding that in a contract for

reciprocal promises, the performance of the defendant’s duty did

not become due until the plaintiff’s performance occurred or was

excused). “A material failure of performance, including

defective performance as well as an absence of performance,

operates as the non-occurrence of a condition.” Id. Such nonoccurrence of a condition prevents the performance of the duty

subject to that condition from becoming due or, if performance is

no longer possible, discharges the duty. Id.; Horton v. Horton,

254 Va. 111, 116 (1997) (“If the initial breach is material, the

other party to the contract is excused from performing his

contractual obligations.”). The failure to perform is deemed

“material” where the “breach was so central to the parties’

agreement that it defeated an essential purpose of the contract.” 

Horton, 254 Va. at 116 (citations omitted); see RW Power

Partners, L.P. v. Virginia Elec. and Power Co., 899 F. Supp. 1490

(E.D. Va. 1995) (stating that “a material breach is one that goes

to the root of the contract”).

The evidence at trial demonstrated that plaintiff performed

services for defendant beginning in June 2002, the effective date

of the contract. Between June 2002 and October 2002, plaintiff

met with defendant in California, attended meetings in

Washington, D.C., to ensure that the appropriated funds were

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available for defendant’s project, discussed with defendant the

anticipated costs of implementing the project, drafted the POA&M

document, and gave a Power Point presentation at the Teledyne

facility in October 2002. As such, the court finds that

plaintiff performed the services required under the contract up

until November 2002. 

However, the evidence also demonstrated that subsequent to

the meeting at Teledyne in late October 2002, plaintiff’s

relationship with defendant quickly deteriorated. The parties

had little communication with each other. The sparse

communication that did take place consisted primarily of

defendant’s attempts to contact Hord and keep him apprised of the

status of the project. Defendant incorporated the corporation

that was to perform under the project, Optimet, with the help of

his attorney, not Hord. Hord did not contribute to the drafting

of the proposal that was submitted to the Navy in March 2003, and

in fact, had never seen the document until the commencement of

this litigation. Nor is there any evidence that plaintiff took

an active role in helping defendant set up or manage his

corporation in 2003. Such failure of communication and lack of

active participation in defendant’s business and the negotiations

between defendant, Teledyne, and the Navy go to the root of

plaintiff’s contract “to provide Business Development and

Corporate Support to Sunrise Precision.” As such, plaintiff

failed to perform a material condition of the contract. Further,

such performance could no longer occur because the professional

services contracted for, at least under Phase 1, were plaintiff’s

assistance and support in obtaining the government contract. 

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13 Both parties stated in the Final Pretrial Conference

Order that plaintiff did not perform under Phases 2-4 of the

contract. Further, based upon the evidence presented at trial,

the court finds that plaintiff did not perform any services under

Phase 2 of the contract, which was directed at Engineering Design

and Initial Production Stage of the project. (TX 65). As such,

plaintiff’s contention that it performed under Phase 2 of the

contract is both contradictory and utterly without merit. 

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Therefore, defendant was relieved of his subsequent duty to pay

plaintiff or further perform under the contract.13 See Horton,

254 Va. at 116-17.

D. Damages

Under Virginia law, a party who commits the first material

breach of a contract is not entitled to enforce the contract. 

Federal Ins. Co. v. Starr Elec. Co., 242 Va. 459, 468 (1991); see

Horton, 254 Va. at 117 (“[A] party who has materially breached a

contract is not entitled to recover damages for the other party’s

subsequent nonperformance of the contract.”). Further, if the

contract is entire, a party’s material breach will preclude

recovery, even for partial performance prior to the breach. Am.

Chlorophyll v. Schertz, 176 Va. 362, 371 (1940). If the contract

is divisible, a party may recover for part performance and such

recovery is not barred by a subsequent breach by the party who

seeks recovery. Id. The entirety or divisibility of a contract

is dependant on the intention of the contracting parties. Id.

(citing Eschner v. Eschner, 146 Va. 417 (1926)).

The terms of the contract demonstrate the parties’ intent

that the contract be divisible. The contract was set up to be

performed in four separate phases, generally coinciding with the

anticipated implementation of defendant’s project. Within each

phase, the payment for plaintiff’s services was set out in

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14 Defendant notes that plaintiff did not plead damages

under a theory of restitution or quantum meruit. However,

defendant is mistaken. Plaintiff sought damages for $117,000,

the asserted value of the services that it believed it performed

under the contract. Plaintiff did not seek damages under the

penalty clause of the contract or for the full value of the

contract. Therefore, implicitly plaintiff seeks an award of

damages measured by the reasonable value of the services

rendered, i.e. restitution. 

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monthly intervals. The payment structure was not based upon

benchmarks achieved by plaintiff or defendant, but rather by

supporting services provided during the month. Therefore, the

court finds that the contract is divisible, and thus, plaintiff

may recover for partial performance despite its subsequent

failure to perform. See id. at 372 (finding that the contract

was divisible where the defendants promised to pay the plaintiff

in regular intervals and where the contract was to be performed

in separate stages). 

In a divisible contract, “the party in breach is entitled to

restitution for any benefit that he has conferred by way of part

performance.” Restatement (Second) of Contracts § 374 (2007);

see Am. Chlorophyll, 176 Va. at 373.14 The sum of money to be

awarded to protect a party’s restitution interest is the

reasonable value to the other party of the services he received. 

Restatement (Second) of Contracts § 371 (2007).

Defendant does not dispute that the reasonable value of

plaintiff’s services for planning and preparation under Phase 1

of the contract is $4000 per month. (See Def.’s Am. Proposed

Findings of Fact and Conclusions of Law, Docket # 82, filed May

11, 2007, at 43 ¶ 5). The evidence at trial demonstrated that

plaintiff performed under Phase 1 of the contract from June 2002

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15 The contract anticipated that Phase 1 would take

approximately four months to complete. The evidence at trial

demonstrated that Phase 1, as contemplated under the contract,

took over a year to complete.

16 In its calculation of damages, plaintiff implicitly

argues that after providing four months of services at $4000, the

cost of its services rose to $9000 per month. However, under the

contract, plaintiff was to be paid $9000 per month for services

provided during the engineering design and initial production

stage of the project, Phase 2. These services were never

provided because the project never reached this stage before

plaintiff’s failure of performance. Therefore, the court does

not find that any of plaintiff’s performed services can be valued

at $9000 per month.

17 Plaintiff also incurred travel expenses in February and

May 2003. However, plaintiff cannot be compensated for these

costs because they were incurred after plaintiff’s material

failure of performance.

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through October 2002, a period of five months.15 Therefore, the

value of plaintiff’s services prior to its failure of performance

is $20,000.16 Plaintiff also demonstrated at trial that prior to

its failure of performance, it incurred $604 in travel and

expenses in June 2002. (TX 2). The remaining expenses presented

at trial were incurred after October 2002, and thus, are not

recoverable.17 As such, plaintiff is entitled to restitution

damages in the amount of $20,604.00.

The Clerk of the Court is directed to close this file.

IT IS SO ORDERED.

DATED: May 31, 2007.

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