Court Opinion

ID: 9900102
Source: CourtListenerOpinion
Date Created: 2023-11-18 22:00:37.011108+00
Date Added: 2024-06-11T09:20:59.719235
License: Public Domain

ARMED SERVICES BOARD OF CONTRACT APPEALS
 Appeals of -                                  )
                                               )
 Delfasco LLC                                  )    ASBCA Nos. 63280, 63402
                                               )
 Under Contract No. W52P1J-16-D-0039           )

 APPEARANCE FOR THE APPELLANT:                      David S. Cohen, Esq.
                                                     Cordatis LLP
                                                     Arlington, VA

 APPEARANCES FOR THE GOVERNMENT:                    Scott N. Flesch, Esq.
                                                     Army Chief Trial Attorney
                                                    MAJ Ronald C. Walton, JA
                                                    MAJ Jason C. Coffey, JA
                                                    Michael McDermott, Esq.
                                                     Trial Attorneys

            OPINION BY ADMINISTRATIVE JUDGE MELNICK
       ON THE GOVERNMENT’S MOTION FOR SUMMARY JUDGMENT

       This consolidated appeal is about a contract for practice munitions. It contained
an economic price adjustment (EPA) clause that provided for a price adjustment based
upon fluctuations in the price of steel. Appellant, Delfasco, LLC (Delfasco), seeks an
adjustment due to increases in its price for bomb bodies made of gray iron, which it
contends is steel. The government moves for summary judgment. The plain meaning
of steel does not encompass gray iron. Additionally, Delfasco has neither met the
standard to consider any purported contrary evidence of trade practice, nor made a
showing that trade practice equates steel with gray iron. Accordingly, the
government’s motion is granted.

       STATEMENT OF FACTS (SOF) FOR PURPOSES OF THE MOTION

        On January 7, 2016, the government awarded to Delfasco the firm-fixed price,
indefinite delivery/indefinite quantity contract identified above. Among the items for
delivery were two different models of practice bombs, the MK-76 MOD No. 5, and the
BDU-33 D/B. (R4, tab 2; gov’t mot., proposed findings of fact [GPFF] ¶ 1; app.
opp’n, statement of genuine issues [AGI] ¶ 1) The contract contained an EPA clause
applicable only to the price of steel. Upon Delfasco providing a required notification
of change in its steel price the parties were to negotiate an adjustment of the contract’s
line-item unit prices. It expressly prohibited adjustments based on price changes for
material other than steel. There were other specific requirements and limitations not
relevant to this decision. (R4, tab 2 at 42-44) 1

       On March 16, 2016, Delfasco obtained a price quote from Brillion Iron Works
for casting what it referred to as Part 2193777, described as a bomb body and elsewhere
associated with the MK-76 MOD 5 (R4, tabs 66, 208 at 1301; GPFF ¶¶ 18-19; AGI
¶ 18). The material from which the bomb body was cast was gray iron, ASTM Class 20
(R4, tabs 66, 208 at 1301; GPFF ¶¶ 18-19, 21; AGI ¶¶ 18-20). This is confirmed by the
bomb body drawings, which state the MK-76 MOD No. 5 material is “Iron casting,
gray in accordance with ASTM A48 Class 20” (R4, tab 208 at 1301). Brillion initially
quoted $11.57 per casting, which included a material surcharge based upon a rate that
would adjust every month (R4, tab 66). The body of the other practice bomb, BDU-33
D/B, was also cast from gray iron, or more specifically, iron castings, gray per ASTM
A48/A48M-00 Class 20S (R4, tab 220; GPFF ¶ 32; AGI ¶ 32). After subtracting
22 cents in packaging charges, Delfasco used the remaining $11.35 of the Brillion quote
to establish the base or benchmark price for both bomb body castings (GPFF ¶¶ 16, 32;
AGI ¶¶ 8, 16, 32).

       On February 3, 2022, Delfasco submitted a certified claim under the EPA
clause for the escalation of the cost of steel above the base in the two practice bombs.
Citing an attached spreadsheet purporting to show increases in foundry bomb body
invoices, Delfasco sought $1,458,490.57. (R4, tab 43; see also AGI ¶ 23) After the
contracting officer denied the claim on February 15 as inconsistent with various terms
of the EPA clause, and the parties discussed the matter by phone on February 25,
Delfasco revised its certified claim on April 26. It addressed the contracting officer’s
comments and increased the amount sought to $1,635,650 due to the discovery of
evidence for additional castings. (R4, tabs 47, 54 at 712-19, tab 70 at 792-96) On
May 13, 2022, Delfasco appealed the contracting officer’s February 15 decision,
which was docketed as ASBCA No. 63280. By final decision dated July 7, 2022, the
contracting officer denied the revised claim, in sum due to a lack of supporting
information and failure to comply with the EPA clause’s notice requirements (R4,
tab 70 at 792-96). Delfasco appealed that decision on September 2, 2022, which the
Board docketed as ASBCA No. 63402. The appeals were consolidated on September 13,
2022. The consolidated appeal stems from claims that only concern the bomb body
castings (GPFF ¶¶ 22-23; AGI ¶¶ 22-23).

1
    The government numbered its pages in its Rule 4 submission with leading zeros,
         which we omit here.
                                            2
                                       DECISION

        “[S]ummary judgment should be granted when there are no genuine issues of
material fact and the moving party is entitled to judgment as a matter of law.”
Goodloe Marine, Inc., ASBCA Nos. 62106, 62446, 22-1 BCA ¶ 38,053 at 184,774
(citing Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986)). “A non-movant seeking to
defeat the suggestion that there are no genuine issues of material fact may not rest
upon its pleadings, but ‘must set forth specific facts showing that there is a genuine
issue for trial.’” Id. (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986)).

        The government advances multiple arguments in support of summary judgment
but we focus only upon the first, summarized by the government as follows: “Since
(1) the bomb bodies are made of iron, (2) the EPA clause only applies to steel, and
(3) [Delfasco’s] claim is based on the costs it incurred in making the bomb bodies,
[Delfasco] cannot rely on the steel EPA clause” as a basis for recovery (gov’t mot.
at 18). Delfasco responds that the contract does not define steel, and contends the gray
iron contained in the bomb bodies is steel. Because steel is undefined it argues the
meaning of the contract is in dispute and we must deny summary judgment and
proceed to a hearing of extrinsic evidence to determine the word’s meaning. Its
primary purported evidence includes citation to industry websites purporting to define
steel and gray iron. It also relies upon the absence of any denials by the contracting
officer’s decisions that the bomb bodies were steel.

       Determining the meaning of a contract starts with its language. TEG-Paradigm
Env’t, Inc. v. United States, 465 F.3d 1329, 1338 (Fed. Cir. 2006) (citing Coast Fed.
Bank, FSB v. United States, 323 F.3d 1035, 1038 (Fed. Cir. 2003) (en banc)). “When
the contract’s language is unambiguous it must be given its ‘plain and ordinary’
meaning and the [Board] may not look to extrinsic evidence to interpret its provisions.”
Id. “Construction of the language of the contract to determine whether there is an
ambiguity is a question of law. . . .” Gardiner Kamya & Assocs. v. Jackson, 467 F.3d
1348, 1353 (Fed. Cir. 2006). Extrinsic evidence cannot be used to create an ambiguity
where none otherwise exists. Interwest Constr. v. Brown, 29 F.3d 611, 615 (Fed. Cir.
1994). Contract terms are ambiguous when, read as a whole, they are susceptible to
more than one reasonable interpretation. McAbee Constr., Inc. v. United States, 97 F.3d
1431, 1434-35 (Fed. Cir. 1996).

        The EPA clause unambiguously limits its application to “the price for STEEL
only” (R4, tab 2 at 42). Our task is to determine the meaning of the word steel and
whether it includes the gray iron used to make the bomb bodies. There is no indication
in the contract that the parties contemplated steel or gray iron to depart from their plain
and ordinary meanings. See Lanclos v. United States, 40 F.4th 1352, 1356 (Fed. Cir.
2022) (“see[ing] no reasonable basis to conclude that the parties sought to define

                                            3
‘guarantee’ or to give the term an alternative meaning”). Accordingly, it is appropriate
to consult their definitions. Id. at 1355. Steel’s ordinary definition is “commercial iron
that contains carbon in any amount up to about 1.7 percent as an essential alloying
constituent, is malleable when under suitable conditions, and is distinguished from cast
iron by its malleability and lower carbon content.” MERRIAM-WEBSTER,
https://www.merriam-webster.com/dictionary/steel (last visited Aug. 18, 2023)
(emphasis added). Another is “any of various modified forms of iron, artificially
produced, having a carbon content less than that of pig iron. . . .” DICTIONARY.COM,
https://www.dictionary.com/browse/steel (last visited Aug. 18, 2023) (emphasis
added). 2 Gray iron is defined separately as “pig or cast iron containing much graphitic
carbon which causes its fracture to be dark gray.” MERRIAM-WEBSTER,
https://www.merriam-webster.com/dictionary/gray%20iron (last visited Aug. 18, 2023)
(emphasis added). One more similarly says it is “pig iron or cast iron having much of
its carbon in the form of graphite and exhibiting a gray fracture.” DICTIONARY.COM,
https://www.dictionary.com/browse/gray-iron (last visited Aug. 18, 2023) (emphasis
added). The definitions distinguish steel from cast or pig iron, which form gray iron,
dictating they are not the same. Given the clarity of both the language of the EPA
clause limiting its scope to steel, as well as the definitions of steel and gray iron, the
clause cannot reasonably be read to encompass gray iron.

       Delfasco cites several Board decisions entertaining extrinsic evidence (app.
opp’n at 12-18). Contrary to this matter, those cases required more development of the
record to ascertain the meaning of the contracts or to resolve additional issues. 3 Here,
the EPA clause is clearly limited to steel. Steel is readily defined and is not gray iron.

2
  Still another is “[a] generally hard, strong, durable, malleable alloy of iron and
         carbon, usually containing between 0.2 and 1.5 percent carbon, often with other
         constituents. . . .” THE AMERICAN HERITAGE DICTIONARY OF THE ENGLISH
         LANGUAGE, https://www.ahdictionary.com/word/search.html?q=steel (last
         visited Aug. 18, 2023).
3
  See Maersk Line, Ltd., ASBCA Nos. 59791, 59792, 16-1 BCA ¶ 36,405 (permitting
         extrinsic evidence to resolve “broader issues in these appeals”); Hanley Indus.,
         Inc., ASBCA No. 58198, 16-1 BCA ¶ 36,244 (denying summary judgment
         because the contract was not clear); DynCorp Int’l LLC, ASBCA No. 59244,
         15-1 BCA ¶ 36,084 (finding review of extrinsic evidence necessary to discern
         the parties’ contractual intent); Raytheon Co., ASBCA No. 58212, 15-1 BCA
         ¶ 35,999 (requiring a hearing into the reasonableness of party interpretations);
         United Launch Servs., LLC, ASBCA No. 56850 et al., 14-1 BCA ¶ 35,511
         (concluding the key contract term was unclear and genuine issues existed
         regarding its meaning); Trace Sys., Inc., ASBCA No. 57574, 11-2 BCA ¶ 34,861
         (finding the contract ambiguous); L-3 Servs., Inc., ASBCA Nos. 56304, 56335,
         09-2 BCA ¶ 34,156 (requiring a better record to determine the reasonableness of
         the parties’ interpretations); AshBritt, Inc., ASBCA Nos. 56145, 56250, 09-2
                                            4
        Nevertheless, “[e]ven when a contract is unambiguous, it may be appropriate to
turn to one common form of extrinsic evidence—evidence of trade practice and
custom.” TEG-Paradigm,, 465 F.3d at 1338 (citing Hunt Constr. Grp., Inc. v. United
States, 281 F.3d 1369, 1373 (Fed. Cir. 2002)). Such evidence “may be useful in
interpreting a contract term having an accepted industry meaning different from its
ordinary meaning—even where the contract otherwise appears unambiguous.” Id.
(quoting Hunt Constr., 281 F.3d at 1373); see also CiyaSoft Corp., ASBCA No. 59913,
22-1 BCA ¶ 38,145 at 185,275-76 (denying summary judgment given a showing of a
conflicting industry interpretation of a contract term). Delfasco’s proffered extrinsic
evidence might be characterized as evidence of trade practice. However, we “should
accept evidence of trade practice only where a party makes a showing that it relied
reasonably on a competing interpretation of the words when it entered the contract.”
Metric Constructors, Inc. v. NASA, 169 F.3d 747, 752 (Fed. Cir. 1999). “This
requirement helps ensure that the evidence of trade practice and custom truly reflects
the intent of the contracting party, and avoids according undue weight to that party’s
purely post hoc explanations of its conduct.” Id.; see also Advanced Eng’g & Plan.
Corp., ASBCA Nos. 53366, 54044, 05-1 BCA ¶ 32,806 at 162,317 (rejecting
consideration of trade practice when not relied upon by the contractor).

        Delfasco’s brief proclaims that “[i]t was always Delfasco’s understanding and
intent that the term ‘STEEL,’ as used in the EPA clause, encompassed the bomb body
castings Delfasco purchased for this Contract” (app. opp’n at 13-14). However, that
statement is purely the advocacy of counsel with no citation to any support, such as a
declaration or other competent evidence from the record. It does not itself constitute
evidence. H2L1-CSC, JV, ASBCA No. 62086, 21-1 BCA ¶ 37,956 at 184,340. That
no one associated with Delfasco testified in support of its counsel’s claims is no mere
technicality. Accordingly, Delfasco has failed to make a showing that when it entered
the contract it interpreted steel to mean gray iron. It has not met the prerequisite
necessary for us to entertain extrinsic evidence of trade practice.

       Though Delfasco has not made the necessary threshold showing of reliance to
introduce evidence of trade practice, even if we were to consider what Delfasco has
offered, it does not suggest that industry considers gray iron to be the same as steel.

       BCA ¶ 34,300 (finding the contract ambiguous); PK Contractors, Inc., ASBCA
       No. 53576, 04-2 BCA ¶ 32,661 (finding the contract ambiguous); Int’l Source
       and Supply, Inc., ASBCA Nos. 52318, 52446, 00-1 BCA ¶ 30,875 (holding the
       Board could not discern parties’ contractual intent from the language of the
       agreement so resorted to extrinsic evidence); Fairchild Indus., Inc., ASBCA
       No. 46197, 98-2 BCA ¶ 29,767 (denying summary judgment given conflicting
       evidence in the record as to the parties’ intended meaning of the term “Phase-out
       Costs”).
                                            5
If anything, the websites it relies upon confirm the definitions set out above. In a
discussion of graphite cast iron, a site called “Total Materia,” says that “[c]ast irons,
like steels, are basically alloys of iron and carbon,” distinguishing the two materials.
Vermicular Graphite Cast Iron, TOTALMATERIA.COM,
https://www.totalmateria.com/page.aspx?ID=CheckArticle&site=kts&NM=263 (last
visited Aug. 18, 2023) (emphasis added). 4 Another, called “AZO Materials,”
describes the difference, saying gray irons “are iron-carbon alloys (and a form of cast
iron) with carbon contents in excess of 2%, generally in the range of 2 to 4%. . . .” 5
Consistent with our prior observation about the lower carbon in steel, it explains gray
irons “differ from steels in that the carbon present exceeds the solubility limit of
1.7%.” An Introduction to Grey Iron, AZO MATERIALS,
https://www.azom.com/article.aspx?ArticleID=783 (last visited Aug. 18, 2023). The
website for “Zen Young Technologies & Solutions,” distinguishes steel and cast or
ductile iron, noting that steel contains 0.1 to 1.7% carbon, while separately stating that
cast iron is 1.7 to 5% carbon. Characteristics of Ductile Iron, ZEN YOUNG,
https://www.zen-young.com/news/characteristics-of-ductile-iron.html (last visited
Aug. 18, 2023). “Metallurgy for Dummies | The Metallurgy’s Blog for Beginners,”
says that “[c]arbon (C) and silicon (Si) are the main alloying elements” of gray iron,
“with the amount ranging from 2.1 to 4 wt% and 1 to 3 wt% respectively. Iron alloys
with less carbon content are known as steel.” Grey Cast Iron – Meaning and
Definition, METALLURGY FOR DUMMIES,
https://www.metallurgyfordummies.com/what-is-grey-cast-iron.html (last visited
Aug. 18, 2023). An article from “Springer Link,” compares ductile cast iron to steel,
observing steels have “by definition much lower carbon contents.” SPRINGER LINK,
https://link.springer.com/article/10.1007/s13632-018-0478-6 (last visited Aug. 18,
2023). None of the sources cited by Delfasco say that gray iron is the same material as
steel (app. opp’n at 16-17).

       Delfasco’s other purported evidence is its contention that the contracting officer
did not object, either in her two claim denials or in the parties’ intervening February 25,
2022, phone call, to Delfasco’s suggestion that the bomb bodies are composed of steel. 6
It maintains this constitutes pre-dispute evidence that the government also believes the

4
  The government does not challenge the authenticity of the web sources cited by
       Delfasco, so we accept them for the purpose of this discussion.
5
  Another source provided by Delfasco, the ASM Specialty Handbook Cast Irons,
       generally reiterates these percentages, saying “[b]ecause carbon is dissolved in
       the molten iron in amounts of about 2.8 to 4.0%, gray iron has the lowest
       casting temperature, the least shrinkage, and the best castability of all ferrous
       metals” (app. opp’n, ex. B at pdf p. 22).
6
  Delfasco’s only cited evidence of the contents of the February 25, 2022, phone call is
       the final decision (app. opp’n at 14 (citing R4, tab 70 at 792-96)). That
       document does not purport to fully recite what was said during that discussion.
                                            6
gray iron in the bomb bodies is steel. Though it is true that “[t]he parties’ interpretation
of the contract during performance, before a dispute arose, is demonstrative of their
contractual intent,” Parsons-UXB Joint Venture, ASBCA No. 56481, 13-1 BCA
¶ 35,378 at 173,598 (citing Max Drill, Inc. v. United States, 427 F.2d 1233, 1240 (Ct.
Cl. 1970)), that principle applies to communications occurring prior to the
circumstances giving rise to the dispute. See ECC Int’l Constrs., LLC v. Sec’y of the
Army, 817 F. App’x 952, 955 (Fed. Cir. 2020). Here, those circumstances are the
increased prices experienced by Delfasco and its resulting EPA claims. The
government’s final decisions and phone call did not predate the dispute events.
Nor does Delfasco cite any other authority for the proposition that failure by a
contracting officer’s denial to address every aspect of a claim constitutes evidence that
the government consents to the points not discussed. See Wilner v. United States,
24 F.3d 1397, 1401-03 (Fed. Cir. 1994) (en banc) (holding a contracting officer’s
decision is not “an evidentiary admission of the extent of the government’s liability,”
and the contractor must prove liability and damages de novo to the Board on a clean
slate); accord Wright Bros., the Bldg. Co., Eagle LLC, ASBCA No. 62285, 23-1 BCA
¶ 38,255 at 185,777.

        Two other short observations put forth by Delfasco are that iron ore is not used
to produce gray iron and that gray iron is often stronger than steel. Neither point helps
it establish that gray iron is steel. If anything, the latter suggests the opposite by
distinguishing the two materials.

        In summary, the EPA clause unambiguously applies only to steel. It is
undisputed the bomb bodies that Delfasco claims have increased in price are composed
of gray iron. The plain and ordinary meaning of steel does not encompass gray iron.
Delfasco has not met the reliance standard necessary to induce us to consider extrinsic
evidence of trade practice that might depart from the words’ ordinary meanings. Even
if it had, none of the evidence it offers sufficiently suggests that steel and gray iron are
the same to establish a genuine issue that would defeat summary judgment for the
government. Given our ruling that the gray iron contained in the bomb bodies is not
steel, we do not consider the other grounds advanced by the government in support of
its motion.

                                             7
                                        CONCLUSION

        The government’s motion for summary judgment is granted. The appeals are
  denied.

            Dated: September 25, 2023

                                                 MARK A. MELNICK
                                                 Administrative Judge
                                                 Armed Services Board
                                                 of Contract Appeals

 I concur                                          I concur

 RICHARD SHACKLEFORD                               OWEN C. WILSON
 Administrative Judge                              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 Nos. 63280, 63402, Appeals of
Delfasco LLC, rendered in conformance with the Board’s Charter.

      Dated: September 25, 2023

                                                PAULLA K. GATES-LEWIS
                                                Recorder, Armed Services
                                                Board of Contract Appeals

                                            8