Opinion ID: 42714
Heading Depth: 3
Heading Rank: 1

Heading: 0 applicable documents

Text: 1.1 Interpretation Attachments I-IV are attached to and form a part of this Agreement. In the event of any conflict or inconsistency in the definition or interpretation of any word, responsibility, schedule, or the contents or description of any task, deliverable, goods, service, or other work, or otherwise, between the Prime Contract and the body of this Agreement and the Exhibits thereto, or between such documents, such conflict or inconsistency shall be resolved by giving precedence to the documents according to the following priority: First ATTACHMENT I: The PRIME CONTRACT between CONTRACTOR and STATE for the Texas State Disbursement Project Second ATTACHMENT II: The Office of the Attorney General, State of Texas Request for Proposal (RFP) for the State Disbursement Unit Services, its Amendments and the written answers to questions regarding the RFP Third The body of this AGREEMENT Fourth National Presort Services’ STATEMENT OF WORK, Exhibit 1 Fifth National Presort Services’ PAYMENT PROVISIONS, Exhibit 2 ACS subsequently acquired Lockheed and shortly thereafter gave National Presort notice that it was terminating some of National Presort’s responsibilities under the subcontract pursuant to paragraph MM of the prime contract. This provision, which was incorporated into the subcontract pursuant to section 2.0, provides: MM. Termination of the Contract 1. Convenience of the State of Texas OAG reserves the right to terminate the contract at any time, in whole or in part, if the OAG determines that a termination is in the State’s interest. The OAG will terminate the contract by providing the Contractor with sixty (60) calendar days advance written notice specifying the extent of termination and the effective date. In the event of such a termination, the Contractor shall, unless otherwise mutually 3 agreed upon in writing, cease all affected work immediately upon the effective date of termination. OAG shall be liable for payments for terminated services performed under the contract up to the effective date of termination. Payment for such services will be made in accordance with Sections VIII.D and IX. The OAG shall have no other liability; including no liability for any costs associated with the termination including, but not limited to, implementation cost (such as facilities acquisition and build out), acquisition cost for infrastructure items (such as equipment, computer hardware and software), termination and settlement of leases and subcontracts, storage and transportation, and personnel relocation.2 The subcontract also contains its own provision governing contract termination. The subcontract provides that ACS can terminate the subcontract at any time, for any reason, provided ACS reimburses National Presort for the costs of supplies and storage that National Presort has incurred in connection with the subcontract: 8.0 Termination CONTRACTOR shall have the right to terminate this Agreement, independent of any OAG right to terminate. In the event the CONTRACTOR terminates the contract for any reason, The [sic] CONTRACTOR shall reimburse the SUBCONTRACTOR for the cost of all unused envelopes, printed forms, paper and other materials, including all such items not yet produced but under contract for production. Reimbursable cost shall include costs of storage of such materials and costs of their disposal.3 After receiving the notice of partial termination, National Presort sought reimbursement based on section 8.0 of the subcontract. National Presort sued for breach of 2 Emphasis added. 3 Emphasis added. 4 contract when ACS refused to pay the full amount National Presort claimed was due for supplies and storage. ACS denied liability based on paragraph MM of the prime contract, contested the reasonableness of the amount of damages sought, filed a breach-of-contract counterclaim based on National Presort’s allegedly substandard performance, and requested a declaration that ACS is not liable for any damages. ACS asserted that section 8.0 is inapplicable to a partial termination of the subcontract, and even if it were applicable, the terms of the prime contract, including paragraph MM, take precedence over the terms of the subcontract. With the district court’s permission, National Presort filed a motion for partial summary judgment on the eve of trial, asserting the subcontract is unambiguous and the parties intended section 8.0 to apply to any termination of the subcontract. The next day, the district court granted the motion for partial summary judgment, holding that section 8.0 controlled termination of the subcontract and ACS breached its express obligation to reimburse National Presort for the specified expenses. The court determined that paragraph MM is inapplicable because (1) ACS provided no rationale for its authority to terminate the subcontract “in the State’s interest,” (2) the prime contract’s provisions are relevant only in the event of an inconsistency with the subcontract, (3) section 8.0 controls because it is more specific, and (4) application of paragraph MM would render section 8.0 meaningless. The court also gave ACS seventeen days to file a motion to reconsider the summary judgment order, recognizing that ACS did not have an adequate opportunity to respond to the motion. 5 The case then proceeded to a jury trial on National Presort’s damages, attorney’s fees, and ACS’s breach-of-contract counterclaim. The jury was instructed that ACS breached the subcontract. The jury returned a verdict rejecting ACS’s counterclaim and awarding National Presort $112,000 in actual damages, $130,000 in attorney’s fees for trial court proceedings, and $35,000 in attorney’s fees for any appellate proceedings. Shortly thereafter, ACS asked the court to reconsider summary judgment on the breach-of-contract issue, arguing that it did not breach the contract because (1) paragraph MM takes precedence over section 8.0 under the express terms of the subcontract, (2) section 8.0 is inapplicable to a partial termination of the subcontract, (3) there was at least some evidence that termination was in the State of Texas’s interest, and (4) ACS offered to pay for some of National Presort’s claimed expenses. ACS further complained that the district court’s failure to give ACS at least ten days to respond to the summary judgment motion as required by FED. R. CIV. P. 56(c) was harmful error. After considering the motion for reconsideration and supporting evidence, the district court denied the motion. The district court reiterated its conclusion that, under section 1.1 of the subcontract, the prime contract’s provisions only come into play if there is a conflict between the terms of the prime contract and the subcontract. The court then concluded that section 8.0 does not conflict with paragraph MM because the latter only applies to the OAG’s ability to terminate the prime contract and does not “speak to” the relationship between National Presort and ACS. Although the court conceded that it was error to rule on 6 the summary judgment motion before ACS had an adequate opportunity to respond, the court concluded the error was cured by giving ACS an opportunity to file its motion for reconsideration and present responsive evidence. On appeal, ACS challenges the summary judgment on its merits and also argues the summary judgment order must be vacated and a new trial ordered because of the district court’s procedural error.4