ARMED SERVICES BOARD OF CONTRACTAPPEALS Appeal of

-- Patriot Pride Jewelry, LLC Under Contract No. 11-PS-006 APPEARANCE FORTHE APPELLANT:

APPEARANCES FORTHE GOVERNMENT: ) ) ) ) ) ASBCA No. 58953

John J. Hoke, Esq.

Smith Hoke, PLLC Albany, NY Raymond M. Saunders, Esq.

Army ChiefTrial Attorney CPT Evan C. Williams, JA

Trial Attorney OPINION BYADMINISTRATIVE JUDGE PEACOCK PURSUANT TO RULE 12.3 This timely appeal involves a dispute concerning a retail agreement executed by PatriotPride Jewelry, LLC ("Patriot Pride" or "appellant") and the Army & AirForce Exchange Service ("AAFES" or "government"). Appellanthas electedto have the appeal processedpursuant to the Board's acceleratedprocedures prescribed in Rule 12.3 and the parties have submitted the appeal for decision on the record under Rule 11. We deny the appeal. FINDINGS OF FACT The Agreement 1. On 25 October 2011, Patriot Pride and the AAFES entered into AAFES Retail Agreement No. 11-PS-006 (the "Agreement") which contained standard terms and conditions that would apply to future transactions between AAFES (as retailer) and Patriot Pride (as vendor) (R4, tab 1at 1). 2. AAFES is a non-appropriated funds instrumentality (NAFI) ofthe United States Government for which the Federal Acquisition Regulation (FAR) does not apply (R4, tab 1at4). Ms. Pamela Thompson is employed by AAFES as a merchandise manager (supp. R4, tab 2 at 2).

### 3. The agreement stated that it would become effective on 25 October 2011 and end 24 October 2018, unless soonerterminated with an estimated value of$50,000 (R4, tab 1at 1). 4. Underthe heading "VENDORTERMS

- Negotiable Payment Terms," the agreement expressly provided there to be no minimum quantity with respect to individual purchase orders (R4, tab 1at 1). No otherprovision ofthe agreement required the government to order any minimum quantity during the duration ofthe contract. 5. Also under the heading "VENDORTERMS -NegotiablePayment Terms," Patriot Pride inserted as one ofits "vendorterms"that it required a "leadtime" of"5 days after receipt oforder" or the ship date on the purchase orderto deliver the costume jewelry (R4, tab 1at 1). The agreement also stated, "Vendor agrees to receive orders and send advanced ship notices (ASNs) and invoices via EDI unless specifically waived by AAFES" (id.). 

### 6. The agreement contained the following provision under the heading "TERMINATION BY NOTICE": 

### Eitherparty may terminate any and all performance under an individual purchase order, provided such notice is given not less than ten (10) calendar days before performance is required. Notice must be given in writing, to include electronic mail. (R4, tab 1at 4) 7. The Agreement's "DISPUTES" 

### clause stated in relevant part:

a. Each contractresulting from, or referencing, this agreement is subjectto the Contract Disputes Act of 1978, as amended (41 U.S.C. 601-613). Except as provided in the ACT, all disputes arising under or relating to this contract shall be resolved under this clause.

f. The contracting officer will mail, or otherwise furnish, a written decision in response to a contractor claim within the time periods specified by law. Such decision will be final and conclusive unless:

2

### (R4, tab 1at 4-5) (1) Within 90 calendar days from the date of contractor's receipt ofthe final decision, the contractor appeals the decision to the Armed Services Board ofContract Appeals (ASBCA)

....

8. The Agreement also contained the following clause: AAFESNENDORPARTNERSHIP MARKETING PROGRAM (JUL 

### 94). The AAFES Marketing Program consists ofnumerous elements to enhance the sale of consumerproducts and services. At the Contractor's request, AAFES will give the Contractor the opportunity to participate in selected elements ofthe program. All participation will be in conjunction with the sale of authorized products and services to authorized customers. AAFES reserves the right to limit the degree of participation based on availability, designated themes of special events, and the overall goals ofthe program. (R4, tab 1at 21) 9. The agreement also included, by reference, various sections ofthe AAFES Supplier Requirements

- Agreement 03-01 ("Supplier Requirements") (R4, tab 1at 8). Ofparticularrelevance to this appeal, the following sections were specifically identified: Section 1 A - Paragraphs Section 8

- Fine Jewelry Section 10

- Exchange Mail Order Catalog/Internet Section 11

- Retail Merchandise (R4, tab 1at 2) 10. Specifically, Section 10 ofthe SupplierRequirements included terms regarding how delivery orders were to be placed, shipping/packing instructions, invoicing and returns (R4, tab I at 55-56). 11. Also on 25 October 2011, the parties executed an AAFES Business Terms Agreement ("Business Terms Agreement") in reference to the Agreement (R4, tab 2 at 1). The Business Terms Agreement obligated Patriot Pride to pay AAFES a 3% fee on

3any sales made as a result of"Co-opAdvertising" (id.). This 3%was to be paid annually ifAAFES advertised PatriotPride's merchandise (id). 12. Under the agreement, an authorized patron couldpurchase an item ofcostume jewelry from AAFES using its online catalog

- this purchase would then trigger the issuance ofthe purchase orderby AAFES to Patriot Pride for that same item (R4, tab 4 at 2; supp. R4, tab 2 at 4). 13. In October 2011, AAFES elected to advertise Patriot Pride's costumejewelry in its online catalog (R4, tab 8). AAFES advertised the costumejewelry as AAFES products with online purchasers to place orders with and make paymentto AAFES (supp. R4, tab 2 at 4). 14. Between 12 May 2011and18 January 2013, AAFES sold 182 items of Patriot Pride's costumejewelry to authorized patrons. AAFES sold the 182 units to its customers for $8,529. (R4, tab 6) 15. During a review ofits online catalog, AAFES determined that it was no longer in its business interest to advertise Patriot Pride's costumejewelry considering unit sales and profitability (supp. R4, tab 2 at 5, tab 3). Although profitability standards were not included in the agreement, these standards were determined by AAFES business practices and decisions (supp. R4, tab 2 at 5). 16. On 25 February 2013, Ms. Thompson notified Patriot Pride, viatelephone, that its products would no longerbe listed online (supp. R4, tab 2 at 5-6). However, AAFES did not terminate the agreement. 17. Under the agreement, AAFES can stillplace orders with Patriot Pride for costumejewelry (supp. R4, tab 2 at 5). Specifically, AAFES may decide in its business judgmentto advertise Patriot Pride's costumejewelry again, potentially leading to additional purchase orders (id.). Also, an authorizedpatron wishing to order an item of costumejewelry from the Patriot Pride assortment no longer online could contactthe AAFES customer service team who could place a special order (id.). 18. On 17 May 2013, Patriot Pride submitted a claim to AAFES for $41,071.43 the "remaining value ofthe contract" (R4, tab 7). 19. On 11July2013, Ms. Thompson sent a letter to Patriot Pride denying its claim. In the letter, Ms. Thompson explained: The AAFES Retail Agreement is simply [an] agreement to do business, not a contract. Itoutlines what is required to do business.

4(R4, tab 8) Patriot Pride alone made the decision to purchase inventory before actual purchase orders were placed. AAFES is not responsible for the $41,071.43 requested.

20. Appellant timely appealed the denial ofits claim by letter to the Board dated 8 October 2013. 21. The agreement has not beenterminated and remains in effect until its expiration date of24 October 2018 (R4, tab 1at 1 ). DECISION Appellant contends that AAFES had an obligation to advertise its products in the AAFES online catalog, apparently for the entire seven-yearterm ofthe Agreement. The government argues that we lackjurisdictionto resolve the claim. Assuming arguendo that the Boardhasjurisdiction, the government maintains that nothing in the Agreement requires AAFES to continue to advertise appellant's products and that, in any event, Patriot Pride has failed to prove that it suffered damages as a consequence ofthe alleged breach. Jurisdiction The government contends that the Board'sjurisdiction is dependent on whether the Agreement qualifies as a CDA "procurement" contract. See Coastal Corp. v. United States, 713 F.2d 728 (Fed. Cir. 1983). Itnotes that because the AAFES is aNAFI described in 28 U.S.C. § 149l(a)(l) (2000), CDAjurisdictionwould normally extend to its contracts as prescribed in 41 U.S.C. § 7102(a)(l)-(2). However, the Agreement here is not one ofthe types of"procurement" contracts identified in the statute to which the Board's CDAjurisdiction extends, according to the government. We agree. Pursuantto the agreement, authorized AAFES patrons can purchase costume jewelry items, among otherways, using the AAFES online catalog, triggering the issuance ofa purchase orderunder the Agreementby AAFES to appellant for thejewelry item to be shipped directly by PatriotPride to the patron. In essence, AAFES merely acts as a retailer/middleman facilitating transactions between appellant and third-party buyers. AAFES does not purchase, or even receive the goods, in fulfilling its intermediary function. No traditional "buyer-seller"relationship exists between AAFES and appellant through which goods or services are transferred to the government. CfRick'sMushroom Service, Inc. v. UnitedStates, 521 F.3d 1338, 1344 (Fed. Cir. 2008). The principal purpose ofthe Agreement is not to acquire property or services. Consequently, there is

5no acquisition by AAFES ofproperty or services within the meaning and coverage ofthe CDA. See alsoNew Era Construction v. UnitedStates, 890 F.2d 1152, 1157-58 (Fed. Cir. 1989) (construction financing arrangementbetween Department ofHousing and Urban Development and nonfederal agency not a CDA contract because no acquisition for the direct benefit or use ofthe federal government); Florida Power & Light Co. v. UnitedStates, 307 F.3d 1364, 1371-74 (Fed. Cir. 2002) (contracts for the furnishing by the government ofuranium enrichment services to utilities were not coveredbythe CDA).The fact that the Agreement itselfprovided that orders issued pursuantto the contract were "subject to" the CDA is not controlling. It is well settled that contractual language cannot conferjurisdiction not authorized by the statute. Florida Power & Light, 307 F.3d at 1370-71 (and cases cited); DRC, Inc., ASBCANo. 54206, 04-2 BCA**~** 32,652 at 161,612 (USAID merely acted as a financier in connection with an underlying construction contract; no intent to procure goods or services and no "buyer and seller" relationship). Accordingly, to the extentjurisdiction exist, it is not derived from the CDA. Nevertheless, we considerthat the Disputes clause in the Agreementprovides an independent basis forjurisdiction. Although it inaccurately references the CDA, the clause unequivocally grants the Board authority to "all disputes arising under or relating to" the Agreement without limitation. By virtue ofthe parties' consensual agreement reflected in the clause, we havejurisdictionto decide the dispute. CfG.E. Boggs & Associates, Inc., ASBCANo. 34841 etal.,**91-1BCA~23,515** at 117,906 (and cases cited) (parties could not confer CDAjurisdictionby consent under non-procurement contract to mitigate effects oflegislation on certain impactedAID contracts; Board assumedjurisdiction under non-CDA Disputes clause), transferred, G.E. Boggs & Associates v. Roskens, 969 F.2d 1023 (Fed. Cir. 1992) (affirmedBoard's conclusion that CDA not applicable to contracts; accordingly, case transferred to then Claims Court pursuant to 28 U.S.C. § 1631 (1988)); see also GAPInstrument Corp., ASBCA No. 51658,**01-1BCA~31,358** at 154,865 (although CDAjurisdiction likely present, Board noted that it could alternatively assumejurisdiction under Disputes clause even if license agreement was a nonprocurement contract). We note in this case that the Agreement does not lend itselfto straightforward categorization. However, we consider it most similar to a basic agreement orbasic ordering agreement and that well-establishedrules associated with such contracts and indefinite quantity contracts generally are germane in discussing the nature ofthe parties' rights and duties relating to the Agreement. Most importantly, the Agreement contains no guaranteed minimum quantity that the government must order or the appellant must supply. Only an estimated dollar amount ($50,000) for the total seven yearterm ofthe Agreement is prescribed. The Agreement itselfsimply sets forth a framework and terms for future orders ofindefinite quantity that may be issued. Until such orders are issued, the parties'

6obligations are illusory and unenforceable and no contract is formed for lack ofmutuality and consideration. See, e.g., Willard, Sutherland & Co. v. UnitedStates, 262 U.S. 489, 493 (1923); Crewzers Fire Crew Transport, Inc. v. UnitedStates, 741F.3d1380 (Fed. Cir. 2014); Coyle 's Pest Control, Inc. v. Cuomo, 154 F.3d 1302, 1306 (Fed. Cir. 1998); Modern Systems Technology Corp. v. UnitedStates, 979 F.2d 200, 202-04 (Fed. Cir. 1992); Mason v. UnitedStates, 615 F.2d 1343, 1346 n.5 (Ct. Cl. 1980), cert. denied, 449 U.S. 830 (1980); Ridge RunnerForestry v. Veneman, 287 F.3d 1058, 1062 (Fed. Cir. 2002); ApexInternationalManagement Services, Inc., ASBCANo. 38087 etal., 94-2 BCA

### ii 26,842 at 133,550, aff'don recon., 94-2 BCA

### ii 26,852; Julian Freeman, ASBCANo. 46675, 94-3 BCA

### ii 27,280 at 135,906.
In this case the Agreementhas been partially performedthrough issuance of 182 orders by AAFES for appellant'sjewelry. Accordingly, even iftheAgreementwas unenforceable ab initio, it became valid and enforceable to the extent ofthat performance. See, e.g., Willard, Sutherland & Co., 262 U.S. at 493; Foreman Industries, ASBCA No. 25674, 83-2 BCA

### ii 16,828 at 83,719. On the otherhand, PatriotPride generally would be entitled to compensation only for the goods actually ordered by AAFES and supplied by appellant. See, e.g., Coyle 's Pest Control, Inc., 154 F.3d at 1306. Mere partial performance does not make the Agreementbinding and enforceable to the extent that it is executory. Cf, e.g., A.C. Ball Co., ASBCANo. 19375, 75-1 BCA 

### ii 11,298 at 53,863. We considerthat in light ofthe partial performance ofthe Agreement, the dispute and claim regarding the parties' advertising rights and obligations should be viewed as falling within ourjurisdiction. The gravamen ofthe claim impacts both the partially performed and executory portions ofthe contract. The Merits Appellant's claim in this case is thatthe governmentbreachedthe Agreement because it opted to discontinue advertising appellant'sproducts in its online catalog. The claim is without merit. There is no provision inthe contractthat requires the government to advertise appellant's products. The sole obligations ofthe parties with respect to online advertising requires appellant to compensatethe government 3 % ofthe order amount only ifan order is placed as a result ofinclusion and advertising ofappellant's jewelryin the catalog. 1 Otherwise, the agreement affords the government considerable discretion with respect to advertising options based on its businessjudgment. Itis unreasonable to interpret the 3%paymentpercentage insertedby appellant inthe BTA for actual orders as a commitmentby AAFES to advertise appellant'sproducts online for seven years regardless ofAAFES's bestbusinessjudgment and the marketability and

1 Whetherthe 3% compensation due the government for orders placed via the online catalog is negotiable and whetherthe parties' have considered a higher percentage in orderto induce the government to readvertise the items in the catalog is uncertain.

7profitability ofthejewelry. Given this discretion, and the unenforceability ofthe agreement generally until orders are placed, we considerthat the government interpretation is the only reasonable interpretation ofthe Agreement when read as a whole.We also note that there is no requirement that appellant sell its products exclusively through AAFES or solely via AAFES online catalog orders. Finally, appellant could elect underthe Terminationby Notice clause to terminate "any and all performance" oforders issued pursuantto the Agreement. 2 This provisionpermittedthe appellant to opt out ofany order it was unable or unwilling toperform. The appeal is denied.3
Dated: 9 June 2014

I concur

# ~~# Administrative Judge Vice Chairman Armed Services Board ofContractAppeals

2 Although appellant inserted as one ofits "vendorterms" that it required a "lead time" of"5 days after receipt oforder," we do not considerthat it thereby negated its right to terminate orders under this clause with ten days notice. Reading the contract reasonably as a whole and giving meaning to all its provisions, appellant's selfimposition ofa five-day lead timepresumes that it elects to accept rather than terminate an order. 3 The scope ofthis appeal encompasses all issues regarding both entitlement and quantum. In light ofour conclusions herein, we need not reach issues regarding the adequacy and persuasiveness ofappellant's evidence ofits alleged damages.
8I certify that the foregoing is a true copy ofthe Opinion and Decision ofthe Armed Services Board ofContract Appeals in ASBCANo. 58953, Appeal ofPatriot Pride Jewelry, LLC, rendered in conformance with the Board's Charter. Dated:

9 JEFFREY D. GARDIN Recorder, Armed Services Board ofContract Appeals