Source: https://law.justia.com/cases/federal/appellate-courts/F2/828/759/368952/
Timestamp: 2019-01-17 22:52:28
Document Index: 600038473

Matched Legal Cases: ['§ 609', '§ 609', '§ 609', '§ 171', '§ 605', 'art:\n41', '§ 606']

Lisbon Contractors, Inc., Appellee, v. the United States, Appellant, 828 F.2d 759 (Fed. Cir. 1987) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › Federal Circuit › 1987 › Lisbon Contractors, Inc., Appellee, v. the United States, Appellant
Lisbon Contractors, Inc., Appellee, v. the United States, Appellant, 828 F.2d 759 (Fed. Cir. 1987)
U.S. Court of Appeals for the Federal Circuit - 828 F.2d 759 (Fed. Cir. 1987)
On December 19, 1980, Lisbon submitted a certified claim to the contracting officer, asserting that the government's termination for default was not justified and claiming a right to certain costs under the termination for convenience clause of the contract. The contracting officer responded by referring to the default termination decision, thereby rejecting the claim, and Lisbon timely filed a direct access action in the Court of Claims3 pursuant to the Contract Disputes Act (CDA), 41 U.S.C. § 609(a) (1982).4
Our scope of review of Claims Court decisions is limited to the correction of errors of law and clearly erroneous findings of fact. Milmark Servs., Inc. v. United States, 731 F.2d 855, 857 (Fed. Cir. 1984).
This case raises for the first time before this court issues with respect to the burden of proof of default in a direct access action under the CDA, 41 U.S.C. § 609(a) (1982). The Claims Court stated that throughout the proceeding there has been a question of who has the burden of proof. It continues into the appeal. We conclude that the government bears the burden of proof on the issue of default by the contractor in this type of proceeding.
The Claims Court states that the parties agreed at trial that the government bears the burden of proof that the default termination was proper. On appeal, the government does not directly challenge that the government had to prove it was justified in terminating the contractor for default. It speaks instead of having been required to satisfy an impossibly high standard for what amounts to a default and, further, seeks to set up sub-issues under the default issue on which it urges that the contractor should be made to bear the burden of proof. In particular, the government asserts that it should have had to prove only that there was a delay in performance, and the contractor should then have had to establish that the delay was justified. The government sometimes couches the latter theory in terms of shifting burdens of production, but, in effect, it argues that the contractor should bear the ultimate burden of proof on the default issue.6 This would mean that a contractor would have to show that the contract was wrongfully terminated rather than the government having to prove that the contract was rightfully terminated. Because review under the CDA in the Claims Court is de novo, 41 U.S.C. § 609(a) (3) (1982), the allocation of the burden of proof must be determined as it can be critical to the result.
Lisbon did not seek review before a BCA, pursuing instead the alternative of a direct appeal in the Claims Court from a contracting officer's decision. Differing with the BCA's, the Claims Court, in several decisions, has stated that the contracting officer's termination for default order is not deemed a "decision" on a government "claim" and, therefore, is not independently appealable. See Industrial Coatings, Inc. v. United States, 11 Cl.Ct. 161, 163-64 (1986); Gunn-Williams v. United States, 8 Cl.Ct. 531, 534-35 (1985); cf. Z.A.N. Co. v. United States, 6 Cl.Ct. 298, 305-06 (1984). Here, the contractor effectively obtained a ruling from the contracting officer denying the contractor's own "claim" for termination for convenience costs, and, thus, was able to get into the Claims Court. Because the contractor is asserting its own "claim," it might, at first blush, seem appropriate to place the burden of proof on all elements of its claim on the contractor. An element of the contractor's claim is, of course, the propriety of the default termination by the government. Were we to place the burden of proof of default on the contractor in direct access appeals to the Claims Court under the CDA, the government would receive an advantage simply by reason of the choice of forum, a result which finds no support in the statute or Court of Claims precedent. As was stated in J.D. Hedin Constr. Co. v. United States, 408 F.2d 424, 431, 187 Ct. Cl. 45 (1969), "a default-termination is a drastic sanction (see Schlesinger v. United States, 390 F.2d 702, 709, 182 Ct. Cl. 571, 584 (1968)) which should be imposed (or sustained) only for good grounds and on solid evidence."
The standard default clause does not require a finding that completion within the contract time is impossible. Termination for default is appropriate if a demonstrated lack of diligence indicates that [the government] could not be assured of timely completion. Case law that involves abandoned or repudiated contracts, and terminations that involve a failure to make progress, applies. Discount Co. v. United States, 554 F.2d 435, 441 [213 Ct. Cl. 567] (1977); Universal Fiberglass Corp. v. United States, 537 F.2d at 398.
We agree that the contractual language found in General Provision 5 does not require absolute impossibility of performance by the contractor before the government may declare the contract in default. See Discount Co. v. United States, 554 F.2d 435, 441, 213 Ct. Cl. 567, cert. denied, 434 U.S. 938, 98 S. Ct. 428, 54 L. Ed. 2d 298 (1977). Nor does it permit default termination merely on the ground that performance is less than absolutely certain. Rather, we construe the contract, as did the Claims Court, to require a reasonable belief on the part of the contracting officer that there was "no reasonable likelihood that the [contractor] could perform the entire contract effort within the time remaining for contract performance." RFI Shield-Rooms, ASBCA Nos. 17374, 17991, 77-2 BCA (CCH) p 12,714, 61,735 (Aug. 11, 1977); see also Discount, 554 F.2d at 441 (justifiable insecurity about the contract's timely completion required). Although the government argues strenuously to the contrary, the Claims Court placed upon the government no greater burden of proving default than that described in Discount.
The sole basis here for termination for default was Lisbon's failure, under General Provision 5 of the contract, "to prosecute the work ... with such diligence as will insure its completion within the time specified in th [e] contract." At trial, the government did not offer direct testimony or any other direct evidence on the time which it estimated it would take Lisbon to complete the contract. Indeed, the contracting officer acknowledged that the government did not undertake a study to determine whether Lisbon could complete the work within the required time, or determine how long it would take a follow-on contractor to do the work. Such a comparison is mandated by the relevant procurement regulations. 41 C.F.R. Sec. 1-18.803-5(a) (3).
To give any viability to the government's justification argument, the government must persuade us that findings (2) and (4) above are clearly erroneous. A finding of fact is clearly erroneous when " 'although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.' " Milmark Servs., Inc. v. United States, 731 F.2d 855, 857 (Fed. Cir. 1984) (quoting United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S. Ct. 525, 542, 92 L. Ed. 746 (1948)).
The government contends that, under the correct legal standard, Lisbon failed to prove various cost items and that the Claims Court erred in including them in Lisbon's damage award. In our earlier opinion remanding this case, this court noted that the Claims Court had made inadequate findings on Lisbon's damage claim and had apparently shifted the burden of proof to the government to establish that the costs were improper, contrary to the precedent of Willems Indus., Inc. v. United States, 295 F.2d 822, 831, 155 Ct. Cl. 360 (1961), cert. denied, 370 U.S. 903, 82 S. Ct. 1249, 8 L. Ed. 2d 400 (1962). In Willems the Court of Claims held, " [t]he claimant bears the burden of proving the fact of loss with certainty, as well as the burden of proving the amount of loss with sufficient certainty so that the determination of the amount of damages will be more than mere speculation." On remand, the Claims Court restated the basis for its allowance of the asserted items of cost. After reviewing the transcript of trial testimony and the exhibits introduced at trial, we hold that the Claims Court was clearly erroneous with respect to the allowance of several items. The government was under no obligation to present evidence attacking an item if Lisbon did not prove prima facie that it was properly included. On the record before us, we are compelled to conclude that Lisbon failed to make a prima facie showing in several instances.
Reinforcing steel (delivered--not used) market value $ 4,186.58 6' PVC drain pipe 1,714.56 3/4 ' expansion joint material 17,832.81 55# building paper 536.89 Pourthane joint sealant 2,213.76
The applicable federal procurement regulations impose an obligation on the contractor to " [t]ake such action as may be necessary ... for the protection and preservation of the property related to this contract which is in the possession of the Contractor and in which the Government has or may acquire an interest." 41 C.F.R. Sec. 1-8.703(b) (9). Further, the contractor's termination costs must be reduced by: " [T]he agreed price for, or the proceeds of the sale of, any materials, supplies, or other things kept by the Contractor or sold, pursuant to the provisions of this clause, and not otherwise recovered or credited to the Government." 41 C.F.R. Sec. 1-8.703(h) (3).
The government's remaining arguments on damages are also without merit. It makes an argument that several cost items, which were incurred before termination, namely, the cost of wells, pump rentals, and fuel for its trailers, are not allowable because Lisbon did not "perform major items of work" during the time. The regulations provide for payment of costs of "all contract work performed prior to the effective date of the Notice of Termination." 41 C.F.R. Sec. 1-8.703(e) (1). It is undisputed that dewatering was necessary for Lisbon to proceed. Heat for trailers is a routine expense of performance. That Lisbon was not performing "major items" of work at the time the expenses were incurred is not a basis for disallowance.
Having reviewed the record and considered all of the government's arguments, we conclude that the Claims Court was not clearly erroneous in awarding any items of cost except for the five items indicated above. In view of the items disallowed, it will be necessary, in addition, to reduce the profit figure which is computed as a percent of the cost of work incurred prior to termination. 41 C.F.R. Sec. 1-8.703(e) (1) (iii).10
Cases pending in the Court of Claims, Trial Division, were transferred to the newly-formed Claims Court pursuant to the Federal Courts Improvement Act of 1982, Pub. L. No. 97-164, Sec. 403(d), 96 Stat. 25, 58 (1982) (28 U.S.C. § 171 note on Transition Provisions: Transfer of Pending Cases)
41 U.S.C. § 605(a) (1982) provides in pertinent part:
41 U.S.C. § 606 (1982) provides: