Court Opinion

ID: 4204831
Source: CourtListenerOpinion
Date Created: 2017-09-20 19:00:09.85997+00
Date Added: 2024-06-11T13:25:58.318635
License: Public Domain

ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeal of --                                    )
                                                )
Central Texas Express Metalwork LLC             )       ASBCA No. 61109
 d/b/a Express Contracting                      )
                                                )
Under Contract No. FA3047-11-C-0023             )

APPEARANCES FOR THE APPELLANT:                          Johnathan M. Bailey, Esq.
                                                        Kristin E. Zachman, Esq.
                                                         Bailey & Bailey, P.C.
                                                         San Antonio, TX

APPEARANCES FOR THE GOVERNMENT:                         Jeffrey P. Hildebrant, Esq.
                                                         Air Force Deputy Chief Trial Attorney
                                                        Lt Col Nathaniel H. Sears, USAF
                                                        Phillip E. Reiman, Esq.
                                                         Trial Attorneys

              OPINION BY ADMINISTRATIVE JUDGE SWEET ON THE
              GOVERNMENT'S MOTION FOR SUMMARY JUDGMENT

       This is an appeal of a contracting officer's (CO's) final decision rejecting the
claim of appellant Central Texas Express Metalwork LLC d/b/a Express Contracting
(CTEM), asserting that it and its subcontractor were entitled to equitable adjustments.
The government has moved for summary judgment, arguing that a settlement agreement
releases the claims. We grant the government's motion, and deny the appeal.

         STATEMENT OF FACTS (SOF) FOR PURPOSES OF THE MOTION

       1. On 18 August 2011, the United States Air Force awarded CTEM Contract
No. FA3047-11-C-0023 (0023 contract) (R4, tab 1). Under the 0023 contract, CTEM
was to repair and replace heating, ventilation, and air conditioning (HVAC) systems in
building 7359 and replace two chillers in building 7359 at Lackland Air Force Base in
exchange for $2,457,237 (id. at 3). The 0023 contract provided that "Final Payment
for each delivery order will be made only after receipt of... release of claims" (id. at 8). 1

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    Despite the mention of a delivery order, the contract does not call for the use of
        delivery orders (R4, tab 1).
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            2. CTEM entered into a subcontract with International Mechanical Services,
     Inc. (IMS) for materials, labor, and equipment (app. resp., ex. 1, ii 2).

            3. In 2013, IMS sued CTEM in the United States District Court for the Western
     District of Texas (app. resp., ex. lA at 2). IMS and CTEM entered into a settlement
     agreement resolving that case (id.) and CTEM agreed to sponsor IMS's claim against
     the government (id. at 3).

             4. In November 2013, Ryan Bueno-the CO-and Kara Clayton-CTEM's
     president-agreed to reduce the scope of the 0023 contract by not requiring CTEM to
     install equipment at building 73 59. As a result, the parties agreed to a $286,645 .41
     credit to the Air Force for the reduced scope. The parties also agreed to a $62,421.68
     equitable adjustment for CTEM for delays and additional work. Finally, Ms. Clayton
     indicated that CTEM intended to file an additional delay claim. (R4, tab 37 at 5-7,
     tab 66 at 2)

            5. On I 0 September 2014, CTEM submitted a request for equitable adjustment
     (REA) for $643,841.88 in increased costs as a result of the Air Force's purported
     delays and changes (R4, tab 16 at 1-2). The REA stated that it "includes various
     subcontractor requests for equitable adjustments caused by the same delays and
     changes" (id. at 2). In particular, the REA indicated that it sought $345,691.07 on
     behalf of IMS (id. at 13-17).

             6. On 25 May 2016, the Air Force and CTEM met to negotiate the REA, which
     included the sponsored claim of IMS (R4, tab 37 at 4-6). At the time, there was an
     outstanding contract balance of $395,727.99 (id. at 4). That outstanding balance did
     not include the agreed-upon $286,645.41 credit to the Air Force, the agreed-upon
     $62,421.68 equitable adjustment or any amount for the pending REA (id. at 5-7).
     "The final agreed amount to settle the [pending] REA [was] $395,727.99, that is
     approximately 56% of the amount of the REA when including the contract increase
     agreed to by Mr. Bueno in November 2013" (id. at 7). Thus, the Air Force essentially
     agreed to forego its credit ($286,727.99), and CTEM agreed to forego its equitable
     adjustment ($62,421.68) and pending REA ($643,841.88). Instead, the Air Force
     simply would make a final payment of $395,727.99-the outstanding contract balance.
     (Id. at 5-7) Settling for the outstanding contract balance would allow for quicker
     payment. CTEM and IMS further agreed that CTEM would provide a final invoice
     and release of claims (release). There is no evidence that CTEM intended to except
     the sponsored claim from the settlement and release, or that the Air Force knew of any
     such intent. (Id. at 7)

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            7. On 2 June 2016, Ms. Clayton signed the release on behalf ofCTEM (R4,
     tab 39 at 1). The release stated that:
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                 Pursuant to the terms of Contract FA304711C0023 and in
                 consideration of final payment in the amount of
                 $395,727.99 which is now due to be paid under said
                 contract to (hereinafter called the Contractor) or its
                 assignees, if any, the Contractor, upon payment of the sum
                 by the United States of America (Herein after called
                 Government), does remise, release, and discharge the
                 Government, its officers, agents, and employees, of and
                 from all liabilities, obligations, claims, and demands,
                 whatsoever, under or arising from the said contract.

I   (Id.) There is nothing in the release excepting the sponsored claim.

I          8. That same day, CTEM submitted its final invoice (R4, tab 38 at 1).

            9. CTEM then contacted Edgar Kleck-IMS' s president-to inform him about
I   the amount IMS would receive for its sponsored claim as part of the settlement (app.

I   resp., ex. 1, ~~ 5-6). Mr. Kleck responded that IMS refused to accept the offer (id.).

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            10. Pursuant to the release, the Defense Finance and Accounting Service
    (DF AS) sent an electronic fund transfer (EFT) in the amount of $395, 727 .99 to
~   CTEM's bank account on 28 June 2016 (R4, tab 40 at 2). The EFT was returned to
    DFAS with a notation that CTEM's account was frozen (R4, tab 43 at 1). DFAS
    emailed Ms. Clayton about the rejected EFT, and inquired how it could make the
    payment. Ms. Clayton responded, "[p]lease DO NOT attempt to proceed with the
    payment. This invoice amount is incorrect and we're trying to delete and/or correct
    this." (Id.)

           11. CTEM then invoiced the government for "the amount that is not disputed,
    which is $328,603.99" (R4, tab 42 at 1, tab 44). The government disapproved that
    invoice because it was not for $395,727.99 under the release (R4, tab 44 at 4).

           12. On 11 November 2016, CTEM submitted a certified claim to the CO for
    $643,841.88 in increased costs as a result of the Air Force's purported delays and
    changes (R4, tab 48 at 1). In particular, the claim sought $345,691.07 on behalf of
    IMS (id. at 15).

           13. The CO denied the claim on the grounds that CTEM released the claims
    (R4, tab 48 at 3).

           14. This timely appeal followed.

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                                        DECISION

I. The Standards for Summary Judgment

        Summary judgment will be granted if a moving party has shown that there are no
genuine issues of material fact and it is entitled to judgment as a matter of law. Celotex
Corp. v. Catrett, 477 U.S. 317, 322 (1986). A non-movant seeking to defeat summary
judgment by suggesting conflicting facts must set forth specific facts showing that there
is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
Thus, ifthe non-moving party carries the burden of proof at trial for elements of its case
and fails to provide such proof, the moving party is entitled to summary judgment.
Dairyland Power Coop. v. United States, 16 F.3d 1197, 1202 (Fed. Cir. 1994). In
deciding summary judgment motions, we do not resolve controversies, weigh evidence,
or make credibility determinations. Liberty Lobby, 477 U.S. at 255. Moreover, we
draw all reasonable inferences in favor of the non-movant. Id.

II. CTEM Agreed to Release its Claims

        CTEM cannot genuinely dispute that it agreed to release its claims. A "final
release followed by final payment to a contractor generally bars recovery of the
contractor's claims under the contract except for those excepted on the release."
Tri-County Contractors, Inc., ASBCA No. 58167, 13 BCA ii 35,310 at 173,346 (citing
Mingus Constructors, Inc. v. United States, 812 F.2d 1387, 1394 (Fed. Cir. 1987)). 2
Here, it is undisputed that CTEM signed a final release. That release broadly stated
that, "the Contractor, upon payment of the sum by the United States of America ... does
remise, release, and discharge the Government, its officers, agents, and employee, of
and from all liabilities, obligations, claims, and demands, whatsoever, under or arising
from the said contract." (SOF ii 7) Moreover, it is undisputed that the government
tendered a final payment (SOF ii 10).

        CTEM argues that the release is not binding because CTEM refused to accept
the $395,727.99 payment, so there has not been a final payment (app. resp. at 8-9).
Once an offer has been accepted, there is a binding contract. Anderson v. United
States, 344 F.3d 1343, 1355 (Fed. Cir. 2003); Noah Lewis, ASBCA No. 23461, 79-1
BCA ii 13,827 at 67,816. Thereafter, neither the offer nor the acceptance generally can
be revoked or withdrawn. Lewis, 79-1 BCA ii 13,827 at 67,816; Grav v. United States,
14 Cl. Ct. 390, 393 (1988); Irvin v. United States, 1860 WL 4919, at *5 (Ct. Cl., Dec.
18, 1860); 1 CORBIN ON CONTRACTS§ 38 at 157-58 (1963). Moreover, once there is a
binding contract, that contract imposes upon each party a duty of good faith and fair

2
    There are limited exceptions to that rule, such as where there is a mutual mistake,
         fraud, duress, or continued consideration of a claim. Bender Shipbuilding and
         Repair Co., ASBCA No. 41459, 91-3 BCA ii 24,230, at 121,186. CTEM does
         not argue that any of those exceptions apply (app. resp.).

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dealing in its performance and enforcement. Metcalf Constr. Co. v. United States,
742 F.3d 984, 990 (Fed. Cir. 2014). 3 The duty includes a duty not to interfere with the
other party's performance. Id.

       Here, CTEM cannot avoid its obligations under the release by refusing to
accept payment. The executed release of claims by CTEM against the Air Force in
exchange for the Air Force making a final payment of $395,727.99 created an offer
which the Air Force accepted, thereby creating a binding contract that precluded
CTEM from withdrawing its offer. (SOF ~ 6) CTEM effectively seeks to withdraw its
offer by refusing to accept payment from the Air Force. That it cannot do because
refusing to accept payment would interfere with the Air Force's performance and
thereby breach CTEM's duty of good faith and fair dealing. Metcalf, 742 F.3d at 990.
Because CTEM cannot withdraw its offer at this point, it is bound to accept
$395,727.99 for its claims, and release the remainder of the claims.

        CTEM also argues that the release is not enforceable because there purportedly
was no consideration ( app. resp. at 7-8). "[T]here is a distinction between a release
given at the time of final payment pursuant to the contract terms and a release given in
connection with an ordinary modification." Universal Painting Corp., ASBCA
No. 20536, 77-1 BCA ~ 12,355 at 59,796. When a contract calls for a release at the time
of final payment, "the contract itself is the consideration for the release." Id. However,
when the release is given in connection with a modification, the release must be
supported by consideration, and performance of a pre-existing duty is insufficient. Id.;
Freedon NY, Inc., ASBCA No. 43965, 04-2 BCA ~ 32,775 at 162,065.

       Here, the release was given at the time of final payment pursuant to the contract
terms (SOF ~~ 6-7). The 0023 contract required a release at the time of final payment
(SOF ~ 1). Moreover, the release expressly stated that it was provided "[p]ursuant to
the terms of Contract F A3047[-]11 [-]C[-]0023 and in consideration of final payment"
(SOF ~ 7). Because the release was given at the time of final payment pursuant to the
contract terms, the contract itself provided the consideration for the release. Universal
Painting, 77-1BCA~12,355 at 59,795-76.

        Even if the release had been given in connection with a modification, there
would have been consideration. CTEM is correct that the settlement amount equaled
the remaining contract balance (SOF ~ 6). However, CTEM ignores the fact that the
parties had agreed to a credit to the Air Force, which was not reflected in that balance
(SOF ~~ 4, 6). As part of the settlement, the Air Force agreed to forego its credit in
exchange for CTEM agreeing to forego its equitable adjustment and REA (SOF ~ 6).
The foregone credit constituted consideration.

3
    The duty of good faith and fair dealing applies equally to contractors. J.C.
         Manufacturing, Inc., ASBCA No. 34399, 87-3 BCA ~ 20,137 at 101,935.

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        Finally, CTEM argues that the release did not preclude its sponsored claims for
IMS in particular because the Air Force was aware at the time of the settlement and
release that CTEM was asserting a sponsored claim on behalf of IMS (app. resp. at 10-12
(citing Matcon Diamond, Inc., ASBCA No. 59637, 15-1BCAiJ36,144)). In Matcon
Diamond, Inc., we held that "final payment does not bar a claim where the contracting
officer knows that the contractor is asserting a right to additional compensation, even
though a formal claim has not been filed." 15-1BCAiJ36,144 at 176,408 (emphasis
added). Here, while the Air Force was aware at the time of the settlement and release
that CTEM was asserting a sponsored claim, that sponsored claim was part of the claim
that the parties settled (SOF iii! 5-6). There is no evidence that the CO knew that CTEM
was asserting a right to compensation in addition to the compensation it received as part
of the settlement and release (SOF iJ 6). On the contrary, the fact that, shortly after the
settlement, CTEM informed IMS of the amount that IMS would receive for its sponsored
claim under the settlement demonstrates that even CTEM knew that the sponsored claim
was part of the settlement, and not an additional claim (SOF iJ 9). Therefore, the final
payment released IMS's sponsored claim in particular.

                                     CONCLUSION

       The government's motion for summary judgment is granted. The appeal is
denied. 4

         Dated: 7 September 2017

                                                   JAMES R. SWEET
                                                   Administrative Judge
                                                   Armed Services Board
                                                   of Contract Appeals

(Signatures continued)

4
    Our denial of the appeal under the 0023 contract does not affect any obligation of
        the Air Force to pay $395,727.99 under the settlement agreement.

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 I concur                                        I concur

~FORD
 Administrative Judge
                                                   t.CZ~'
                                                 OWEN C. WILSON
                                                 Administrative Judge
 Acting Chairman                                 Vice Chairman
 Armed Services Board                            Armed Services Board
 of Contract Appeals                             of Contract Appeals

       I certify that the foregoing is a true copy of the Opinion and Decision of the
Armed Services Board of Contract Appeals in ASBCA No. 61109, Appeal of Central
Texas Express Metalwork LLC d/b/a Express Contracting, rendered in conformance
with the Board's Charter.

      Dated:

                                                 JEFFREY D. GARDIN
                                                 Recorder, Armed Services
                                                 Board of Contract Appeals

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