ARMED SERVICES BOARD OF CONTRACTAPPEALS Appeal of

--
Martin Edwards & Associates, Inc.

Under ContractNo. W91247-11-D-0004

APPEARANCES FORTHE APPELLANT: ) ) ) ) )

APPEARANCES FORTHE GOVERNMENT: ASBCA No. 57718

H. Addison Winters, Esq. J. Thomas Neville, Esq.

Yarborough, Winters & Neville, P.A. Fayetteville, NC Raymond M. Saunders, Esq.

Army ChiefTrial Attorney Erica S. Beardsley, Esq.

Trial Attorney

OPINION BYADMINISTRATIVE JUDGE MCILMAIL

The U.S. Army contracted with appellant, Martin Edwards & Associates, Inc. (MEA), for the installation and service ofclothes washers and dryers at military installations in North Carolina. The Army terminated the contract for cause, then entered into a bilateral modification with MEAto convertthe termination to a "no-cost"termination for the convenience ofthe Army that included mutual releases ofall claims arising from the contract. 1 MEA contends that the modification was induced by misrepresentation and, therefore, is voidable. MEA also contends that the termination ofthe contract was improper, and that the Army breached the contract. While the Board heard eight days of testimony andthe parties filed extensivebriefs on the merits, we need not discuss many of the arguments because, as discussed below, we deny the appeal based upon the modification's release language.2

1 We earlier denied a government motion for summaryjudgmentwith respect to the release in that modification, finding sufficient evidence to raise a triable issue offact whether alleged government misrepresentation induced MEA's agreement to the release. 

### Martin Edwards & 

### Associates, Inc., ASBCA No. 57718, 12-2 BCA**~** 35,058 at 172,210. 2 Judge Grant, who presided overthe hearing in this appeal, has since retired.FINDINGS OF FACT

1. On 31 March 2011, the United States Army awarded to MEA Contract No. W91247-11-D-0004, for the delivery, installation, and 12-month lease of(an estimated) 3,970 washers and dryers at Fort Bragg, Simmons Army Airfield, and Camp Mackall, North Carolina, for $489,351.48 (R4, tab 8 at 1, 4-6, tab 38 at 4).

2. Also on 31 March 2011, the Army issued Task OrderNo. 0001, requiring MEA to deliver and install the appliances by 15 May 2011 (R4, tab 9 at 3), the end ofthe contract's 45-day "phase-in"period (R4, tab 7 at 3,**~** 2.6.1.1).

3. The contract'sperformance work statementprovides:

HOURS OF OPERATION. The Contractor shall perform services during the following hours: Monday through Friday, 7:30 a.m. through 4:00 p.m. except Federal Holidays, unless otherwise authorized by the Contracting Officer orthe Contracting Officers [sic] representative.
(R4, tab 7 at 3,**~** 2.4)

4. On 4 April 2011, representatives ofMEA and the Army attended a contract post-award meeting (tr. 1150). Amongthe attendees was Mr. Rickie Day, MEA'spresident (R4, tab 49). Mr. Day informedthe Army that MEAwould not have any appliances to install for three weeks, until approximately 25 April 2015 (tr. 1154-55; R4, tab 49 at 4). According to Mr. Day, he asked that MEAbe allowed to work on weekends or "after hours," and the Army informed him that MEA would not be allowed to do so (tr. 1157-58). That account is generally corroborated by two other attendees, one an MEA employee and the otherthe owner ofthe company whose appliances MEA had been contractedto replace (tr. 11169, 11248). However, accordingto the contracting officerwho awardedthe contract, Mr. Day rejected any suggestion that MEAwork on weekends or afterhours (tr. 2/86), an account that three otherArmy representatives who attended the meeting generally corroborate (tr. 51113, 6171, 7/24). A fifth Army representative who attended the meeting does not recall any discussion ofweekend or after-hours work (tr. 4/42-43).

5. Duringthe post-award4 April 2011 meeting, MEA and the Army discussed the possibility ofextending the phase-in period, perhaps to 30 June 2011 (tr. 1/55-56, 58), but before the meeting ended the Army decided that it would not extend the phase-in period (tr. 1/63). MEAthen informedthe Army that it "wouldprobably be impossible to get all that equipment in, injust21 days"; that is, the 21 days remaining duringthe expected 25 April 2011 arrival ofthe appliances and the 15 May 2011 end ofthe phase-in period

2

### (tr. 1/63). However, by the end ofthe meeting, Mr. Day informed the Army that he would "do everything that [he] had to do to make sure [the Army's] equipmentwas installed in that 24 days that [he] had"; that is, that MEA would install the appliances by 15 May 2011 (tr. 1/72).

6. Later on 4 April 2011, the contracting officer contacted othervendors, including Inventory Accounting Service, Inc. (IAS), regarding their ability to provide and service washers and dryers (see 

### tr. 2/89-90). IAS represented that it "would require to work on the weekends as well as after hours in orderto be able to complete the installation" within a 45-day phase-inperiod (tr. 2190, 

### 225).

7. The next day, 5 April 2011, the contracting officerrequested that MEA "confirm whether you can and will comply with the contract's phase-in period ofperformance ending May 15, 2011" (R4, tab 15). MEA responded the same day, stating that "[i]t is MEA's intent to meet and fulfill all terms and conditions ofthe contract" (R4, tab 16). Despitethat response, the Army, on 5 April 2011, terminated the contract for cause, finding that "the contractor failed to provide adequate assurance ofperformance, specifically in reference to the completion ofthe Phase-in period" (R4, tab 17 at 1). Also on 5 April 2011, the Army entered into a contract with IAS for washers and dryers at Fort Bragg, Simmons Army Airfield, and Camp Mackall, with aphase-in period tobe completed by 20 May 2011 (R4, tab 72 at 4, tab 73).

8. On 6 April 2011, MEA, through Mr. Day, requested that the contracting officer rescind the termination ofthe contractwith MEA, or, in the alternative "convertthe termination for cause into a no-cost convenience termination" (R4, tab 98 at 1; tr. 1/95-96;
see 

### tab 153 at 10,**~** 

### 28, tab 153 at 17-18,**~~** 

### 11, 15). The written request did not mention weekend or after-hours work (R4, tab 98). On 8April 2011, MEA and the Army entered into bilateral ModificationNo. P00002 (Modification No. 2) (R4, tab 18). The modification recites that its purpose is to convertthe termination for cause "to a no-cost Termination for the Government's Convenience," and that "(i]n consideration ofthe promises set forth herein and for good and valuable consideration, the parties agree as follows:"

a. This supplemental settlement agreement modifies the contract to reflect a no-cost settlement agreement of$0.00 and ContractNumber W91247-11-D-0004 is Terminated in its entirety for the Government's Convenience.
b. The Contractor agrees that any and all claims which the Contractor, and its assigns, officers, directors, employees, agents and subcontractors may have or acquire against the Government or its present and former agents, employees, or agencies, arising under or relating to this Contract, 

### and are

3[sic] hereby fully and irrevocably releases and forever discharges the Government and anyone claiming by, through
or under it, from any and all claims, actions, causes ofaction, obligations, costs, expenses, damages, losses and liabilities, ofany kind or nature, whether known, unknown or unforeseen, vested or contingent, either encompassedby or which hereafter can arise outof or result from the performance or termination of the Contract.

c. The Government, in consideration for the Contractor providing the release set forth in paragraphb, above, on behalf ofitself, and anyone claimingby, through or under it, does hereby fully and irrevocablyrelease and forever discharge the Contractor, its members, officers, employees and related entities, and anyone claimingby, through or underthem, from any and all claims, actions, causes ofactions, obligations, costs, expenses, damages, losses and liabilities, ofany kind or nature, whetherknown, unknown orunforeseen, vested or contingent, either encompassed by or which hereafter can arise out oforresult from the performance, termination, or non-performance ofthe Contract.
(R4, tab 18 at 1-2 (emphasis added))

9. ModificationNo. 2 was negotiated by attorneys for MEA and the Army (tr. 1/96-97, 5/33). The attorneys did not testify at the hearing, and no first-hand account of their negotiations

- exceptthe modification itself(R4, tab 18)

- appears in the record. The modification does not mention weekend orafter-hours work (id.).

10. Mr. Day signedthe modification for MEA (R4, tab 18 at 1 ), and testified that with respectto the negotiations thatproducedthe modification, "whatever [the attorneys] talked about Ireally don'trecall"; however, he testifiedthat a condition ofthe agreement
was thatMr. Daypersuadethe contractorwhose appliances were to be replaced "to leave her machines in place until all the other machines were installed" (tr. 1/97). Mr. Day and MEA learned on 30 April 2011, that IAS wouldbepermittedtowork on weekends (R4, tab 153 at 11,**~** 30; tr. 1/99-100). Mr. Day testifiedthathe would not have signed the release ifhe had known that IAS was goingto be allowed to work weekends and after hours, because, as he understood it, IAS was "beingtreated differentthan [MEA] was" (tr. 11100).

11. On4 May 2011, MEA filed a certified claim with the contracting officer for $850,000 (R4, tab 20). MEA stated that:

4This improper [termination for convenience] claim, and breach ofcontract claim, as noted above, is based on:

1. Bad faith by the Army (as shown by an intentto injure MEAby clear and convincing evidence)

11. Clear abuse ofdiscretion bythe Army in terminating the contract

m. The Army's award ofthe Contract with no intention of fulfilling its promises, and subsequent improper convenience termination.
(R4, tab 20 at 9) MEA claimed that it had requestedpermission to work on Saturdays, but that the contracting officerhad refused (id. at 4, 9).

12. On 29 June 2011, the contracting officer issued a final decision denying the claim, finding that during the post-award conference MEAhad "rejectedthe idea of working on weekends" (R4, tab 21).

13. On 27 July 2011, MEAtimely appealed to this Board.

DECISION

In Modification No. 2, MEAreleased all claims againstthe Army arising from the contract (finding 8). 3 

### Martin Edwards, 12-2 BCA**~** 35,058 at 172,209, 172,210 n.l. Although MEA asserts thatthe release is voidable because, MEA contends, the Army induced its assent by misrepresentingthat weekend and after-hours workwould not be allowed, that assertion fails. Ifa party's manifestation ofassent is induced by either a fraudulent or a material misrepresentation by the otherparty upon which the recipient is justifiedin relying, the contract is voidable by the recipient. RESTATEMENT (SECOND) OF CONTRACTS § 164(1) (1981). Here, the contractthat MEA asserts is voidable is ModificationNo. 2, which includes the release ofclaims againstthe Army (finding 8).

3 The Army challenges whetherwepossessjurisdictionto entertain MEA'sbreach claims and challengetothe termination ofthe contract for cause, contending that MEA did not present those claims to the contracting officer (gov'thr. at 64). We disagree: MEA's claim to the contracting officer specifically alleges that the Army breached the contract, and chall.enges both the Army's exercise ofdiscretion "in terminating the contract," as well as, in MEA's view, the "subsequent improper convenience termination" (finding 11).



### 5MEA asserts that its manifestation ofassent to the modification was induced by fraudulent and material misrepresentations by Army representatives who, MEA asserts, statedthat MEA would not be allowed to work on weekends or "afterhours." In Martin Edwards, 12-2 BCA

### ii 35,058 at 17,209, we stated that "[i]fthe government denied MEA the opportunity to workweekends knowing it would allow weekend work in a later contract, then this couldconstitute a material misrepresentation" (emphasis added). However, upon consideration ofthe entire record, including the testimony elicited during the hearing, we determine that MEA fails to demonstrate that any misrepresentation regarding weekend or after-hours work was fraudulent or material.4

As an initial matter, we find it unnecessary to decide whetherthe Army actually represented that it would not permitMEA to work on weekends or afterhours. Assuming without deciding thatthe Army misrepresented that weekend work would not be allowed, MEA does not demonstrate that the misrepresentation was fraudulent. For a misrepresentation to be fraudulent, the maker must intend his assertion to induce a party to manifest his assent. RESTATEMENT (SECOND) OF CONTRACTS§ 162(1). MEA contends that the Army made the misrepresentation on 4 April 2011 (finding 4), but the Army did not
even terminate the contract until 5April 2011 (finding 7). MEA does not demonstrate that the Army intended, before even terminating the contract, to induce MEA into an agreement to convertthe termination from one for cause to a no-cost, no-claims, termination for convenience. Indeed, itwould require a substantial stretch ofthe imagination for us to arrive at such a conclusion.

Nor does MEA demonstrate that such a misrepresentation was material. A misrepresentation is material ifitwould be likely to induce a reasonable person to manifest his assent, or ifthe makerknows that it wouldbe likely to induce the recipient to do so. RESTATEMENT (SECOND) OF CONTRACTS§ 162(2). The materiality ofa misrepresentation is determined from the viewpoint ofthe maker. Id. cmt. c. First, MEA fails to demonstrate that the Army knew it wouldbe likely that a prohibition on weekend and after-hours work would induce MEAto agree to Modification No. 2; MEApoints to no evidence, for example, that it communicated in any way to the Army before signing the modification that a factor in its decision to sign was thatthe Army would not allow work on weekends or afterhours. For example, MEA'srequestto the contracting officerthatthe termination be convertedto a no-cost convenience termination does not mention weekend and after-hours work (finding 8).
Second, MEA does not demonstrate that such a prohibition would be likely to induce a reasonable person to manifesthis assent to Modification No. 2. Indeed, we find no objectively reasonable connection between an Army statementthat it would not allow weekend or after4 Atpage 25 ofits openingbrief, MEA contends thatthe Army also misrepresented whether it would allow an extension ofthe phase-inperiod, but points to no evidence that such a representation induced it to sign ModificationNo. 2.



### 6hours work, and a contractor's later decision afterthe termination ofits contract for cause to agree to a no-cost, no-claims conversion ofthe termination to one for the convenience ofthe Army. Tobegin with, Modification No. 2 does not mention weekend or after-hours work, nor does the record, except for the modification itself, contain any first-hand evidence (that is, from the attorneys who negotiated the modification) ofthe content ofthe negotiations that producedthe modification (finding 8). 5 In addition, MEA left the 4 April 2011 meeting assuring the Army thatthe appliances wouldbe installed by 15 May 2011, even (according to Mr. Day's account ofthe meeting) knowing that weekend and after-hours workwould not be allowed (findings 4, 5). We do not find it likely that a reasonable contractorthat had determined that it could meet an installation date without working weekends or after hours would be induced laterto assentto Modification No. 2 by a prohibition on weekend and afterhours work that hadbeen announced before the contractor determined that the appliances could betimely installed. That is, we do not see how such a statement, made when and in the context it is alleged to have been made, would matterto a reasonable contractor deciding whetherto sign ModificationNo. 2. In other words, because, according to MEA, it could have timely installed the appliances during only regular, weekday hours (finding 5), whether weekend and after-hours workwould be allowed would have been immaterial to a reasonable contractor, in MEA'sposition, deciding whetherto assent to Modification No. 2.
Indeed, Mr. Day's explanation ofthe significanceto him ofthe issue ofweekend and after-hours work indicates notthat a statementprohibiting such work induced him to sign the modification, butthat had he known thatthe Army was going to allow IAS to work on weekends and afterhours, he would not have signed it, because, as he understood it, IAS
was "being treated differentthan [MEA] was" (finding 10). That is, having learned after signing ModificationNo. 2 thatthe Army was allowing IAS to do what, according to him, MEAwas not allowedto do (work on weekends and after hours), Mr. Day felt unfairly treatedby comparison. However, the evidence does not demonstrate that the Army made any representations to MEAregarding how it would administer a follow-on contract. Citing RESTATEMENT (SECOND) OF CONTRACTS§ 161, MEA contends thattheArmy misrepresented the facts by failing to disclose to MEAthat IAS wouldbe allowedto work
on weekends and after hours (app. reply at 161), butthe contracting officer and IAS only discussed such work afterthe Army had met with MEA on 4 April 2011, and did so before the contract was terminated and MEArequested a conversion (findings 6, 8). Therefore, there was nothing about IAS'spossible work schedule for the Army to disclose to MEA during the 4 April 2011 meeting, and no conversion request for the Army even to consider until more than a day later. As for whatthe Army did not disclose between the 4 April 2011 meeting andthe 7 April 2011 conversion, MEA failed to establish what, ifanything, the

5 Mr. Day's testimony evinces that the Army conditioned agreement to a conversion on MEApersuading the previous contractorto allow existing appliances to remain in place during thephase in ofnew appliances (finding 10).

7Armyheld back in the lead up to 

### Mr. Day signingModification No. 2, by failing to present any testimony bythe attorneys whose negotiations resulted in that modification.

Because MEA failed to demonstrate that the Army induced MEA's assent to ModificationNo. 2 by a fraudulent ormaterial misrepresentation, that modification is not voidable; consequently, the modification releases MEA's claims against the Army arising from the washer and dryer contract. Forthese reasons, the appeal is denied.

Dated: 10 March 2015

I concur**/,,,-~---/-7-** /__ / / / A ,· /. / ·" // </**~---** / / ,///'// _// /-:/'.,· .i/ J

.. )4 /' 

## :::/**~** 

## r / t/ '/';;(

__

/ 

## .:_/')'l>(o MARKN. STEMPLER / Administrative Judge Acting Chairman Armed Services Board ofContractAppeals Administrative Judge Armed Services Board ofContract Appeals

I concur

Administrative Judge Vice Chairman Armed Services Board ofContractAppeals

I certify thatthe foregoing is a true copy ofthe Opinion and Decision ofthe Armed Services Board ofContractAppeals in ASBCANo. 57718, Appeal ofMartin Edwards & Associates, Inc., rendered in conformance withthe Board's Charter.

Dated:

8 JEFFREYD. GARDIN Recorder, Armed Services Board ofContractAppeals