Court Opinion

ID: 4370774
Source: CourtListenerOpinion
Date Created: 2019-02-25 18:00:08.263742+00
Date Added: 2024-06-11T14:49:28.374572
License: Public Domain

ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeal of --                                 )
                                             )
ASF A Uluslararasi Insaat Sanayi Ve          )      ASBCA No. 61471
 Ticaret AS                                  )
                                             )
Under Contract No. W912PB-13-P-0157          )

APPEARANCE FOR THE APPELLANT:                       D. Lee Toedter, Esq.
                                                     Coeur d'Alene, ID

APPEARANCES FOR THE GOVERNMENT:                     Raymond M. Saunders, Esq.
                                                     Army Chief Trial Attorney
                                                    MAJ Jason W. Allen, JA
                                                     Trial Attorney

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

       The government moves for summary judgment, arguing that appellant cannot,
as a matter of law, prove that the government is liable for the claimed costs because
the costs were not expressly allowable in the contract. Appellant opposes the motion,
alleging that the government is responsible for payment of the traffic fines, penalties,
and violations incurred by the government's personnel while using appellant's vehicles
during performance of the contract. The Board denies the motion.

       STATEMENT OF FACTS (SOF) FOR PURPOSES OF THE MOTION

       1. On March 12, 2013, the Army (hereinafter Army or government) entered into a
fmn-fixed-price contract with ASFA Uluslararasi Insaat Sanayi Ve Ticaret AS (ASF A or
appellant) for a six-month lease of five vans in Turkey. The original contract term was from
March 15, 2013 to September 14, 2013. The contract included two six-month options for
continued lease, to run from September 15, 2013 to March 14, 2014 and March 15, 2014 to
September 14, 2014, respectively. (R4, tab 1 at 1-5)

      2. The contract contained various standard clauses, including Federal Acquisition
Regulation (FAR) 52.212-4, CONTRACT TERMS AND CONDITIONS - COMMERCIAL ITEMS
(FEB 2012), paragraph (c), Changes (R4, tab 1 at 11-15).

        3. The contract was silent as to which party would be responsible for traffic
tickets, fines, and penalties incurred by government personnel while using the vehicles
during the performance period (R4, tab 1).
        4. On April 11, 2013, bilateral Modification No. POOOOl was implemented,
changing the initial period of performance to run from March 22, 2013 to
September 21, 2013. As part of this modification, the periods of performance for the
first and second options were changed to September 22, 2013 to March 21, 2014, and
March 22, 2014 to September 21, 2014, respectively. (R4, tab 2 at 1-4)

      5. The government exercised the first option period on August 27, 2013,
through Modification No. P00002 (R4, tab 3).

       6. By Modification No. P00003, dated March 21, 2014, the government
exercised the second option period (R4, tab 4).

       7. On June l, 2017, ASF A submitted its claim to the government for
$11,953.54, alleging it was entitled to reimbursement for fines, tolls, and toll-fee
penalties incurred by government employees who drove the rented vans during the
contract performance period (R4, tab 9).

       8. In its claim, ASF A alleged that the traffic fines, tolls, and toll-fee penalties
were registered against the rental vehicles by local and state Turkish authorities, rather
than against individual vehicle operators (R4, tab 10; compl. ,r,r 7, 10-11).

       9. For the purposes of this motion only, the government does not dispute that
the charges were incurred by its employees (gov't mot. at 3-4).

        10. The contracting officer (CO) issued a final decision on October 12, 2017,
denying some of the requested reimbursement. The CO determined a portion of the
claim related to "HSG tolls" was allowable, and ordered reimbursement in the amount
of $940.44. However, the CO found that $11,013.10 was unallowable because paying
this portion, which consisted of the penalties and fees, would be "in violation of US
fiscal policy to pay for violations of the law which a traffic or HSG toll penalties
constitutes." (R4, tab 11 at 6)

      11. Appellant filed a timely appeal to the Board on January 4, 2018, which was
docketed as ASBCA No. 61471.

                                       DECISION

       The government contends that appellant cannot satisfy its burden of proof and
show that the claimed costs are allowable under the contract or the FAR. The
government ai;gues two main points - that this firm-fixed-price contract does not allow
for additional costs and allowing any additional costs may be in violation of the
Anti-Deficiency Act (ADA). (Gov't mot. at 6-12) Appellant opposes the motion,

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primarily arguing that that would not be in violation of the ADA, but payment by
appellant may actually constitute an improper gift from appellant to the government
(app. opp'n at 2-5). We agree with the government that appellant's "apparent theory
of recovery is that the government's failure to pay these costs constitutes a breach of
the implied duty of good faith and fair dealings." Thus we first focus on whether the
firm-fixed-price contract precludes an implied duty of good faith and fair dealing when
it is not explicitly stated in the contract, making summary judgment appropriate.

        Summary judgment is appropriate when there is no genuine issue of material fact
and the movant is entitled to judgment as a matter of law. Proveris Scientific Corp. v.
Innovasystems, Inc., 739 F.3d 1367, 1371 (Fed. Cir. 2014); Mingus Constructors, Inc. v.
United States, 812 F.2d 1387, 1390-91 (Fed. Cir. 1987). A material fact is one that may
affect the outcome of the decision. Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
248-49 (1986). The moving party bears the burden of establishing the absence of any
genuine issue of material fact, and all significant doubt over factual issues must be
resolved in favor of the party opposing summary judgment. Celotex Corp. v. Catrett,
477 U.S. 317, 322 (1986). We draw all justifiable inferences in favor of the nonmoving
party. CI2, Inc., ASBCA Nos. 56257, 56337, 11-2 BCA ,r 34,823 at 171,353.

        The government argues it is not liable for any costs over and above the contract
value unless a formal change is made to the contract. The government relies on the
fact that this is a firm-fixed-price contract, and appellant should have, essentially,
known better. (Gov't mot. at 6-8) For the purposes of this motion, the government
admits that its employees were in sole possession and control of the vehicles at the
time the fines and fees were incurred (SOF ,r 9).

       The government contends that because the express language of the contract
does not establish a duty of care, none exists. The government cites to Metcalf Constr.
Co. v. United States, 742 F.3d 984, 990 (Fed. Cir. 2014), as its authority (gov't mot.
at 13). However, the Board has analyzed, and denied, this same argument in CiyaSoft
Corporation, ASBCA Nos. 59519, 59913, 18-1 BCA ,r 37,084.

       There, the government argued that because the express language of the contract
did not establish a duty of care, none existed, again citing Metcalf Construction.
CiyaSoft, 18-1 BCA ,r 37,084 at 180,521-22. The Board rejected the government's
argument, specifically holding:

             [C]ontracts can include implied duties, such as the duty of
             good faith and fair dealing. SIA Construction, Inc.,
             ASBCA No. 57693, 14-1 BCA ,r 35,762 at 174,986 (citing
             Metcalf Construction Co. v. United States, 742 F.3d 984,
             990 (Fed. Cir. 2014)). The implied duty of good faith and
             fair dealing is limited by the circumstances involved in the

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              contract. The implied duty prohibits acts or omissions that,
              though not proscribed by the contract expressly, are
              inconsistent with the contract's purpose and deprive the
              other party of the contemplated value. See First
              Nationwide Bank v. United States, 431 F.3d 1342, 1350
              (Fed. Cir. 2005) (duty was breached by legislation that
              "changed the balance of contract consideration"). The
              Supreme Court has addressed implied duties in contracts
              stating:

                     [A] contract includes not only the promises set forth
                     in express words, but, in addition, all such implied
                     provisions as are indispensable to effectuate the
                     intention of the parties and as arise from the
                     language of the contract and the circumstances
                     under which it was made, 3 Williston on Contracts,
                     § 1293; Brodie v. Cardiff Corporation, [1919] A. C.
                     337, 358[)]. ...

              Sacramento Navigation Co. v. Salz, 273 U.S. 326, 329
              (1927). The Board also has indicated that when
              considering implied duties that the circumstances involved
              in the contract must be considered. Free & Ben, Inc.,
              ASBCA No. 56129, 09-1 BCA ,r 34,127 at 168,742 (citing
              Coastal Government Services, Inc., ASBCA No. 50283,
              99-1 BCA ,r 30,348 at 150,088).

Id. at 180,521. The Board went further, noting that in situations where the contract
involved leased items, the Supreme Court has held:

              [I]n every lease there is, unless excluded by the operation
              of some express covenant or agreement, an implied
              obligation on the part of the lessee to so use the property as
              not to unnecessarily injure it.... This implied obligation is
              part of the contract itself, as much so as if incorporated
              into it by express language. It results from the relation of
              landlord and tenant between the parties which the contract
              creates.

Id. (quoting United States v. Bostwick, 94 U.S. 53, 65-66 (1876); see also A&B Ltd.
Partnership v. GSA, GSBCA No. 15208, 04-1 BCA ,r 32,439 at 160,504-05). The
Board found that the government could not show that the "implied duty would conflict
with, exceed, or otherwise alter the express provisions of the contract, particularly in

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light of the government's argument the contract imposed no duties on the
government." Id. at 180,522.

       Here, contrary to the government's assertions, a duty of care may exist even
when it is not expressly written into a contract. The Board has carefully considered
the Army's arguments and the underlying contract in question, but concludes that there
are genuine issues of material fact that preclude summary judgment. Thus, the Board
must consider the contract as a whole, including formation and intent. There are
genuine issues as to circumstances surrounding how the fines and penalties in question
occurred, the capacity in which those who incurred the fines were acting, and if the
circumstances surrounding the contract's creation establish or preclude an obligation
by the government to be liable for fines and penalties registered against the vehicles
while in the government's control. As such, these above-noted issues are fact
intensive and, based on the current record, are not ripe to be resolved by summary
judgment. Cooley Constructors, Inc., ASBCA No. 57404, 11-2 BCA ,r 34,855
at 171,457. Because the issues of fact identified above require us to deny summary
judgment, the Board need not address the parties' arguments related to the ADA.

                                   CONCLUSION

      The government's motion is denied.

      Dated: February 5, 2019

                                                 O~S-O_N_ _ __

                                                 Administrative Judge
                                                 Vice Chairman
                                                 Armed Services Board
                                                 of Contract Appeals

 I concur                                        I concur

RICHARD SHACKLEFORD
Administrative Judge                             Administra · Judge
Acting Chairman                                  Armed Services Board
Armed Services Board                             of Contract Appeals
of Contract Appeals

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            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. 61471, Appeal of ASFA
     Uluslararasi Insaat Sanayi Ve Ticaret AS, rendered in conformance with the Board's
     Charter.

           Dated:

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

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