## United States Court of Appeals for the Federal Circuit

04-1334

UNITED PACIFIC INSU RANCE COMPANY, Appellant,

v.
James G. Roche, SECRETARY OF THE AIR FORCE, Appellee.
Gary A. Wilson , Post & Schell, P.C., of Philadelphia, Pennsylvania, argued for appellant. With him on the brief was Salil P. Patel , Duane Morris LLP, of Philadelphia, Pennsylvania. Hillary Stern , Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for appellee. With her on the brief were Peter D. Keisler , Assistant Attorney General, David M. Cohen , Director, and James M. Kinsella , Deputy Director. Of counsel on the brief was William M. Lackermann, Jr. , Chief, Office of Trial Attorney, Office of General Counsel, United States Department of the Air Force. Appealed from: United States Armed Se rvices Board of Contract Appeals

## United States Court of Appeals for the Federal Circuit

04-1334

UNITED PACIFIC INSU RANCE COMPANY, Appellant,

v.
James G. Roche, SECRETARY OF THE AIR FORCE, Appellee.

_________________________ DECIDED: March 18, 2005

_________________________ Before MAYER, Circuit Judge , FRIEDMAN, Senior Circuit Judge , and CLEVENGER, Circuit Judge

. MAYER, Circuit Judge

. United Pacific Insurance Company (“United”) appeals the decisions of the Armed Services Board of Contract Appeals, A SBCA Nos. 52419, 54270, 54271 (Feb. 7, 2001 & Dec. 29, 2003) (“ United I ”). It asserts claims arising from events that occurred before it entered into a takeover agreement with the government, as we ll as two claims stemming from the takeover agreement. Because the board lacks jurisdiction, we cannot consider the merits of United’s pre-takeover claims. As to the remaining two claims, we affirm.Background On September 28, 1995, the government executed Contract No. F28609-95-C0037 with Castle Abatement Corp. (“Castle”). The contract was for all nece ssary work and material for repair of a Secondary Containment Sy stem at McGuire Air F o rce Base, New Jersey, for a fixed-price of $1,957,630. The contract also encompass ed removal and dis pos al of contaminants at fixed unit prices, with a to tal not-to exceed price of $2,312,367. Castle obtained a payment and performance bond from United for $2,312,267, and a labor and material payment bond for $1,156,134 , with the government as obligee. Prior to securing the bonds , Castle executed an indemnity agreement for the benefit of Unit ed and other insurance companies. On July 22, 1997, the governm ent termi nated the rights of Castle to proceed under the contract for default. In an ear lier appeal, we addressed Castle’s default involv ing a related series of contracts with the Air F o rce. See United Pac. I n s. Co. v. Roche , 380 F.3d 1352, 1354-55 (Fed. Cir. 2004) (“ United II ”). C a stle had no pending claims against the governmen t at the time of default and it did not appeal the termination. Within a mont h, the government made demand upon United as surety, to fulfill its obligations un der the performance bond. United entered into a wri tten takeover agreement wit h the govern m ent on August 5, 1997, in which it agreed to complete t he work remaining under the contract. The takeover agreement was inco r porated into the original contr a ct and United was substituted as the contractor. Certain “W hereas” claus es within the takeover agreement detailed the background and pur pose of the agreement. One such “Whereas” claus e stated that a contract balance of $998,863. 64 remained to be paid by the government

04-1334 2for the fixed price por tion of the original c ontract. T he stated contract balance was based upon the pay ments made to Cast le as of the date of termination, and Unite d drafted the takeover agreement incorporating the am ount. The recited amount turned out to be incorrect. The takeov er agreem ent understated the amount paid to Castle prior to the termination, and thus overstated t he contract balance available to United t o complete the Castle c ontract by $46,288.37. In a letter dated October 23, 1998, Unit ed submitted a request for equitable adjustment to the gov ernment c ontaining ten claims. On May 21, 1999, the parties met to discuss possible settlement. United’s r epresentative alleges , but the g o vernment disputes, that an oral settlement of certai n claims on which the parties agreed was entered into for $214,745. After settlement negotiations reached an im passe, the contracting officer denied all claims and United appealed to the Armed Services Board of Contract Appeals (“board”). It alleged f our counts: (1) for an equita ble adjustment based upon pretakeover events; (2) for a cardinal change; (3) for a contract balance; and (4) for the specific enf orcement of t he settlement agreement. On December 29, 2003, the board concluded that it lack ed juri sdiction over United’s c l aim s based upon contaminated soil and other site conditions that arose prior to the takeov er agreement. Similarly, the board determined that the indem nification agreement betw een Castle and United could not serve as a vehicle to assign Castle ’s unliquidated claims to United. The board did, howev er, address the merits of United ’s post-takeover claim s . It denied the contract balanc e claim, al though adjustment was made for a minor mathematical error. It determi ned that t he amount of the contract balance in the

04-1334 3“Whereas” clause was not controlling bec ause the clause was a mere recital of a n undisputedly erroneous fact; and it rejected Un ited’s a ssertion that a settlement had been reac hed at the May 21, 1999 meet ing. United timely appealed the board’s decision and we have jurisdiction pur suant to 28 U.S.C. § 1295(a)(10). Discussion Like the board, we are pr ecluded from reviewing the merits of United’s pretakeover claims. The board determined that United lac k ed standing and, therefore, that it lacked jurisdiction to entertain United ’s pre-takeover claims bec ause United was not a “contractor” as defined by t he Contract Disputes Act, 41 U.S. C. §§ 601-613, at the time those claims arose. Our subsequent decision in United II addressing an identic a l takeover agreement between the same parties leaves no dispute that United’s pretakeover claims are not subjec t to the board’s jurisdiction. See United II , 380 F.3d at 1354-57. As we reasoned in United II , “the remainder of United’ s claims suffer from the same infirmity that made the claims in Fireman’s Fund [Insurance Co. v. E nglan d , 313 F.3d 1344 (Fed. Cir. 2002)] not subjec t to the Board’s jurisdicti on: they rel a te to and depend upon events that occurred before the takeover agreement and with respect to which Unit ed was not a ‘contractor’ under t he Contrac t Disputes Act when the claims arose.” Id. at 1356. Therefore, w e turn to the post-ta keover claims. *

* Realizing that United II would result in an affirmance of the board’s decision dismissing the pre-tak eover claims for lack of jurisdiction, United moved to transfer the pre-takeover clai ms to the United States C ourt of Federal Claims, and asked us to decide the contract balanc e claim. We denied United’s motion t o bifurcate the appeal and transfer some of the claims. To the ext ent United renews its motion to transfer under 28 U.S.C. § 163 1, we decline becaus e we have jurisdiction over this appeal and because “[c]ourts have exercis e d t heir section 1631 transfer powers but not usually, or preferably, in the form of bifurcation of claims.” Galloway Farms, Inc. v

. United States , 834 F.2d 998, 1001 (Fed. Cir. 1987).

04-1334 4Our review of a board decision is based upon the standards set out in the Contract Disputes Act of 1978, 41 U.S.C. §§ 601-613. E.L. Ham m & Assocs., Inc. v. England , 379 F.3d 1334, 1338 (Fed. Cir. 2004). We review questions of law de novo

. Eastman Kodak Co. v. Rumsfeld , 317 F.3d 1377, 1379 (Fed. Cir. 2003). “Contract interpretation is a question of law; therefor e, the board’s decisions regarding this matter are not binding.” M.A. Mortenson Co. v. Brownlee , 363 F.3d 1203, 1205 (Fed. Cir. 2004). “Because ‘the boar d has considerable ex perience and expertis e in interpreting government contracts,’ howev er, ‘its interpre tation is given caref u l consideration and great respect.’” Id. (quoting Cmty. Heating & Plumbing Co. v. Kelso , 987 F.2d 1575, 1579 (Fed. Cir. 1993)). United’s contract balance claim is based on its contention that the government is obligated t o pay the balance referenced in the takeover agreement’s “Whereas” claus e. This c l aus e is the only part of t he takeover agreement that sets out a s p ecific d o llar amount for the balance. Examining the “ W hereas” clause in light of the surrounding provisions in the takeover agreement, we agree with the board that the clause is a recital of fa ct. As suc h , “a recital of fact in an integr ated agreement may be shown to be untrue.” R e statement (Second) of Contract s § 218 (1981). Here, the operative terms of the takeover agreement entit led United t o “all sum s now due and payable and to become due and payable” under the contrac t. As drafter of the docum ent, United incorporated the inc o rrect balance when it had the opportunity to c o rrect the government’s calculation error. United does not contest that the contract balance in the “Whereas” clause was inaccur a te, so “the true facts have the same operation as if stated in the writing,” unl ess estoppel is prov en. Restatement, § 218 cmt b.

04-1334 5Although the applicat ion of equitable estoppel against the government is not entirely foreclosed, the Supreme Court has qualified that “the Government may not be estopped on the same terms as any other litigant.” Hec k ler v. Cmty. Health Servs. , 467 U.S. 51, 60 (1984). Our own pr ecedent dictates “that if equi table estoppel is available at all against the government some form of affirmative misconduct must be shown in addition to the traditional re quir ements of estoppel.” Zacharin v. United States , 213 F.3d 1366, 1371 (Fed. Cir. 2000)

. The evidence is undisputed th at the incor r ect recital in the “Whereas” clause was the result of unintentional ma thematical errors, not affirmative misconduct. United’s final content ion is that the board erred by failing to find a settlement agreement between the par ties with respect to six of it s ten claims. For the May 21, 1999 transaction to be an enforceable settlem ent agreement, United must prove “a mutual intent to contract including offe r, acceptance, and cons ideration; and authority on the part of the government r epresentative who entered or ratified the agr eement to bind the United States in contract.” Total Med. Mgmt., Inc. v. United States , 104 F.3d 1314, 1319 (Fed. Cir. 1997). United bas es its argument on the testimony of its representat ive at the meeting and his handwritten notes. According to Un ited, the government made an u n equiv o cal offer as to seven of its clai ms and United affirmatively acc epted six, thus r eaching an oral settlement. United’s evidence was contr adicted by the contracting officer, also present at the meeti ng, who claimed th at the government was seeking a global settlement agreement of all c l aim s and that the government needed additional materials before reaching agreement. The governm ent also produced corresponden ce drafted

04-1334 6immediately after the meeting, which indicat ed that a settlement offer was neither made nor accept ed. On June 2, 19 99, the Deputy Base Engineer wrote that United’s v i ew of events was wrong and the governm ent in no way offered to settle the claims for $214,745. And, the gov ernment also relies on a Ma y 26, 1999, letter from United’s counsel seeking further negotiat i ons concer ning two of the ten claims s u pposedly settled at the May 21, 1999 meeting. In this battle of contradictory testimony we are left to review the board’s findings, based in no small par t on credibility, and the contemporaneous c o rrespondence of the parties. We agree with the board’s conclus i on that a fi nal agreem ent was not reached; the parties were still in the proces s of negotiations. “I n the absenc e of contra ctual intent or sufficiently definite terms, no c ontractual obligations arise.” Modern Sys. Tech. Corp. v. United States , 979 F.2d 200, 202 (Fed. Cir. 1992). Conclusion Accordingly, the decision of the Armed Se rvices Board of Contract Appeals is affirmed.

AFFIRMED

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