Opinion ID: 2263053
Heading Depth: 1
Heading Rank: 3

Heading: the district-based facility

Text: Eagle argues that the CAB and the trial court erred when they concluded, as a matter of law, that the bilateral modification of the contract precluded Eagle from recovering start-up costs because, under that modification, Eagle was solely responsible for the facility. On this point we agree with Eagle. The bilateral modification states: The contractor is responsible for obtaining all permits necessary to establish the recycling processing and buy back facilities in the District. By executing this contract the District does not waive any requirements of law or the right to review permit application in accordance with applicable criteria. The processing and buy-back facilities are private facilities which are the sole responsibility of the contractor. [Emphasis added.] The CAB ruled that the italicized sentence meant that Eagle had no legitimate expectation of recovering costs of the District-based facility. The trial court agreed, stating: The plain meaning of the modification clearly establishes the District Facility as the sole responsibility of Eagle. This includes, inter alia, start-up and construction costs associated with the . . . Facility. We do not read this language so broadly. Although we would normally defer to the expertise of the CAB, see Dano Resource Recovery, 620 A.2d at 1352, in this instance we think the CAB's conclusion that Eagle essentially waived its statutory right to recover costs it reasonably incurred is an incorrect reading of the bilateral modification. Surely, a waiver of such magnitude must be clear and unambiguous. Had the parties actually intended to place sole financial responsibility on Eagle for construction of the District facility, the bilateral modification could have  and should have  declared that intention in plain, unambiguous language. See, e.g., Keller v. Keller, 171 A.2d 511, 514 (D.C. 1961) (If the parties intended a waiver. . . in all circumstances, it was an easy matter for them to state such intention). It did not do so, however, and for this reason we hold that the CAB's interpretation of the bilateral modification stretches its meaning too far. The sole responsibility language of the bilateral modification is too vague and imprecise to be construed as a deliberate waiver of Eagle's statutory right to recover its costs actually incurred. Thus, standing alone, the bilateral modification does not preclude Eagle from recovering its start-up costs. Eagle's argument that the start-up costs were incurred pursuant to the contract is, however, without merit. All construction costs associated with the District-based facility were incurred after the contract was declared void. This case is therefore distinguishable from New York Mail & Newspaper Transportation Co. v. United States, 139 Ct.Cl. 751, 154 F.Supp. 271, cert. denied, 355 U.S. 904, 78 S.Ct. 332, 2 L.Ed.2d 260 (1957), upon which Eagle primarily relies. In that case a contract was declared invalid three years after performance began. The court held that [w]hen an individual or the Government rescinds a contract, the parties are to be placed, as far as possible, in the position they would have occupied without the transaction. Id. at 759, 154 F.Supp. 271, 154 F.Supp. at 276 (footnote omitted). The contractor was therefore awarded costs that it had incurred during its performance of the contract. The difference between New York Mail and this case is that, in New York Mail, the contractor began performance before the contract was terminated. Consequently, since the [cost incurred by the plaintiff] was due solely to the requirements of the contract, the Government should reimburse that expense in accordance with the terms of the contract. . . . Id. at 759-760, 154 F.Supp. at 276. In the instant case, however, Eagle did not even acquire the site for the facility until January of 1995, nine months after the CAB declared the contract void (see note 5, supra ). Thus it was not due solely to the requirements of the contract that Eagle incurred its start-up costs. On the contrary, the contract was no longer valid when Eagle began its construction of the facility, and New York Mail does not support its argument. This is not to say that Eagle is necessarily foreclosed from recovering any of its start-up costs. As we have said, the bilateral modification cannot be read as a waiver of Eagle's statutory right to recover costs reasonably incurred. Indeed, it may well be that some of the costs Eagle incurred in building the facility were reasonable, since it might not have purchased the site and begun construction had DPW initially followed the CAB's instructions and informed Eagle that the contract had been declared void ab initio. We leave it to the CAB on remand to determine what specific start-up costs, if any, were reasonably incurred.
Eagle also contends that the CAB and the trial court erred when they applied the theory of quantum meruit in determining whether Eagle was entitled to recover start-up costs for construction of its District-based facility. Instead, according to Eagle, it was entitled to be compensated for all of its facility start-up and construction costs under the contract's termination-for-convenience-of-the-government clause because it was an innocent contractor. The most obvious flaw in this argument is Eagle's insistence that it is entitled to recovery under the contract's termination-for-convenience clause. It is undisputed that the CAB declared the contract void ab initio in April of 1995. It therefore makes no difference that Eagle did not act in bad faith and had no knowledge that the procedures the District followed in procuring the contract were improper ( i.e., that Eagle was an innocent contractor). D.C.Code § 2-302.05(d)(2) specifically states that, when a contract is declared void (as it was here), an innocent contractor is entitled only to costs actually incurred, not all of its costs as Eagle is now claiming. Thus Eagle's potential recovery is based on this statutory provision, not on the termination-for-convenience clause of the contract. [16] The CAB's task, therefore, was to determine what costs were actually incurred, i.e., Eagle's reasonable costs. Eagle also errs in characterizing the CAB's decision in terms of recovery based on quantum meruit. It does not appear that the CAB relied on that theory in assessing whether Eagle's claimed costs for start-up and construction of the facility were reasonable, at least not explicitly, and certainly not exclusively. It merely considered the fact that the District had received no benefit from the construction of the facility  which was not begun until after the contract was declared void ab initio  in deciding that Eagle's start-up costs were not recoverable as costs actually incurred. [17] It also based its decision on the contract's bilateral modification and on the continued commercial viability of the facility even after the contract was determined void (although, as we have held, its decision with regard to the scope of the bilateral modification was erroneous). The CAB's conclusion that construction costs incurred after the contract was declared void were not reasonable under section 2-302.05(d)(2) is supported by substantial evidence (though the CAB's explanation leaves something to be desired, since it merely stated that it agreed with the OIG's analysis that the start-up costs never benefited the District recycling program). As we said earlier, evidence is substantial when a reasonable mind might accept [it] as adequate to support a conclusion. Belcon, 826 A.2d at 384 (quoting Epstein, 812 A.2d at 903). This court must therefore accept the finding even though there may also be substantial evidence in the record to support a contrary finding. Id. (quoting Harrison, 758 A.2d at 22). The record reveals that, as of the date the contract was declared void ab initio, Eagle had not even begun construction on its District-based facility. Eagle's contention that it was faced with a Hobson's choice when RSI filed its protest: either stop performance and risk a lawsuit from the District for material breach of contract, or perform until the Superior Court decided the matter and risk receiving nothing under the CAB's quantum meruit approach is therefore without merit. If Eagle had actually begun construction during the performance period, the CAB might well have concluded that the costs associated with construction were reasonable. But because the facility did not even exist at the time the contract was declared void, the costs associated with its construction cannot be regarded as actual costs of performance. On the other hand, Eagle might not have purchased the site at all and begun construction if it had not relied on DPW's actions. If the CAB finds that such reliance was reasonable, then Eagle may be entitled at least to recover some or all of its site-acquisition costs, and (as we said earlier) perhaps even some of its start-up costs. This, of course, is for the CAB to decide in the first instance on remand, after hearing such evidence as Eagle may choose to present.
Eagle also maintains that [t]he conclusion that Eagle's costs represented capital improvements that had commercial value to Eagle was not supported by substantial evidence. We must agree, for the record is silent as to how the OIG, and thereafter the CAB, concluded that the District-based facility was commercially valuable to Eagle. The CAB found that Eagle was using the facility after the end of the District recycling job for commercial purposes and that the facility had a commercial value. It also determined that Eagle used the facility for a follow-on recycling contract awarded by the District to Eagle. The CAB appears to have based this determination largely on the audit conducted by the OIG. The OIG's report stated: We observed during our field work, between June 13, 1996, and July 12, 1996. . . [that] the contractor was using the facility for commercial purposes. Hence, in our opinion, it is not impracticable for the contractor to put the facility to commercial uses. In addition, we believe that the facility has significant economic value in the recycling marketplace. . . . We also understand that Eagle, under a current contract for recycling with DPW, is using the facility. [18] No further details are provided. The CAB's decision contains a similarly opaque and conclusory determination that the costs represent capital improvements that have a commercial value to Eagle. Nowhere does the CAB explain why this is the case. The cost and revenue schedules contained in the OIG's report appear to cover the years 1993 to 1995 (the term of the contract), but that was before the District-based facility was built. [19] If there is supporting documentation for the CAB's conclusion that the facility had commercial value, it is not this court's responsibility to find it. We do not ourselves scour the record in search of evidence or rely on evidence other than what the Board itself relied on to support its findings. Abadie, 806 A.2d at 1229. Because the Board relied on the OIG's audit report, and because that report appears to provide no support for its conclusions, we cannot ascertain where the conclusion that the facility had commercial value came from. The substantial evidence test is satisfied only when an administrative agency fully and clearly explains its decision and demonstrates `a rational connection between the facts found and the choice made.' Office of People's Counsel v. Public Service Comm'n, 797 A.2d 719, 726 (D.C.2002) (citation omitted). Since we cannot discern from the record the CAB's reason for concluding that the facility had commercial value, we must remand the case to the CAB for further proceedings on this issue as well.