Court Opinion

ID: 3207222
Source: CourtListenerOpinion
Date Created: 2016-05-26 20:02:21.263677+00
Date Added: 2024-06-11T14:29:15.672288
License: Public Domain

In the United States Court of Federal Claims
                                        No. 14-132 C
                                        May 26, 2016

****************************************            Breach of Contract;
                                       *            Contracts of Adhesion;
TABETHA JENNINGS,                      *            Due Process Clause;
                                       *            RESTATEMENT (SECOND) OF CONTRACTS
      Plaintiff,                       *               § 78 cmt. c (Unenforceable
                                       *                    Promises);
v.                                     *               § 79 cmt. e (Effects of Gross
                                       *                    Inadequacy);
                                       *               § 86 cmt. c (Unenforceable
THE UNITED STATES,                     *                    Contracts);
                                       *            28 U.S.C. § 1491 et seq. (Tucker Act
      Defendant.                       *               Jurisdiction);
                                       *            41 U.S.C. § 7102 et seq. (Contract
****************************************               Disputes Act).

James A. Simpson, Jr., Simpson & Simpson, Searcy, Arkansas, Counsel for Plaintiff.

Rebecca Sarah Kruser, United States Department of Justice, Washington, D.C., Counsel for the
Government.

       MEMORANDUM OPINION AND ORDER DENYING THE GOVERNMENT’S
     PENDING MOTIONS AND REQUIRING THE GOVERNMENT TO SHOW CAUSE
     WHY THE COURT SHOULD NOT DETERMINE THAT SECTIONS C.2.10, C.3.1(6),
       AND C.3.4(j) OF THE MARCH 9, 2012 CONTRACT ARE UNLAWFUL AND
                              UNENFORCEABLE

BRADEN, Judge.

I.      RELEVANT FACTUAL BACKGROUND.1

      On March 9, 2012, the United States Postal Service (“USPS”) renewed contract No. HCR-
726A1 (the “Contract”) with Ms. Tabetha Jennings to provide daily mail transportation services

        The relevant facts discussed herein were derived from: Ms. Jennings’ July 21, 2014
        1

Amended Complaint (“Am. Compl.”), the Exhibits attached to the Amended Complaint (“Am.
Compl. Exs. 1–8”); the Government’s November 13, 2015 Motion For Summary Judgment
(“Gov’t SJ Mot.”) and Appendix attached thereto (“Gov’t App. A1–77”); the Government’s
November 13, 2015 Proposed Findings Of Uncontroverted Fact (“GPFUF”); Ms. Jennings’
December 14, 2015 Response to the Government’s Motion For Summary Judgment (“Pl. Resp.”)
from Leslie, Arkansas to Timbo, Arkansas for $34,000 per year. Gov’t App. A1–48, A59; see also
Am. Compl. Ex. 1. Prior to that time, Ms. Jennings served seven years as a rural contract carrier
for the USPS without any issues related to her performance. Am. Compl. ¶¶ 4–5. On February
21, 2013, Ms. Jennings was terminated for “failure to perform in accordance with the terms of
[the] [C]ontract.” Gov’t App. A66.

       A.     The Contractual Provisions At Issue.

       The Contract consisted of a thirteen page “Statement of Work and Specifications” that
prefaced thirty-five additional pages of boilerplate “Terms and Conditions.” Gov’t App. A1–48.
The Contract term was from April 1, 2012 to March 31, 2018. Am. Compl. ¶ 5. The provisions
relevant to the Memorandum Opinion And Order follow.

       Section C.2.10 of the Contract provides that

       [t]he supplier must have adequate contingency plans in place[,] should the use of
       postal facilities be terminated or limited. In no event shall the [USPS] be held
       liable for, or incur any additional cost associated with, such use or the termination
       of such use during the contract term.

Gov’t App. A26 (emphasis added).

       Section C.3.1(6) of the Contract provides that the USPS

       may terminate this contract, or any part hereof, for default by the supplier, or if the
       supplier fails to provide the [USPS], upon request, with adequate assurances of
       future performance.

Gov’t App. A27.

       Section C.3.4(j) of the Contract provides that

       [t]he supplier must proceed diligently with performance of this contract, pending
       final resolution of any request for relief, claim, appeal, or action arising under the
       contract, and comply with any decision of the contracting officer.

Gov’t App. A32 (emphasis added).

       In addition, Section C.3.8 of the Contract, provides, as a ground for termination for cause:

       a. The supplier’s failure to perform service according to the terms of the contract[.]

Gov’t App. A34.

and the Appendix attached thereto (“Pl. App. A1–18”); and Ms. Jennings’ December 14, 2015
Response To Defendant’s Proposed Findings Of Uncontroverted Fact (“PRGPFUF”).

                                                 2
       B.      Relevant Facts.

        On January 18, 2013, the Contracting Officer sent Ms. Jennings a letter denying her
“access to the mail and facilities . . . based on a disqualifying event in the course of contract
performance.” Am. Compl. Ex. 5. The Notice of Temporary Denial of Access stated that:

       On January 18, 2013, you conducted yourself in an unprofessional manner and
       disrupted the mail processing operations at the Leslie post office.

       Consequently, I am temporarily denying you further access to the mails and all
       Postal Facilities. This temporary denial of access is pending further investigation
       in the matter and will remain in effect until you receive further correspondence
       from this office. You are afforded an opportunity by notice of this letter to present
       in writing any information that you believe to be material to this incident and would
       like for me to consider when making my final decision in the matter. Any such
       information is to be submitted to this office no later than Friday, January 25,
       2013. You will be notified when a permanent decision has been made.

           If you have not already done so, you are instructed to return the drivers ID badge
            to the Administrative Official.
           By copy of this letter, the US Postal Inspection Service is made aware of this
            decision.

       Despite the temporary denial of access to the mail, it is still your responsibility to
       ensure that service is provided on this contract. Failure to do so may result in other
       action, including a contract termination for default.

Am. Compl. Ex. 5 (bold in original) (emphasis added).

      On January 25, 2013, Ms. Jennings responded to the Contracting Officer’s Notice. Gov’t
App. A73–76.2

       On February 14, 2013, the Contracting Officer issued a letter permanently denying Ms.
Jennings access to the Postal facilities. Am. Compl. Ex. 7. The following reasons were cited:

       On January 18, 2013, you were issued a temporary denial of access to the mails and
       Postal facilities. The temporary denial of access referenced an option for you to

       2
         Ms. Jennings’ email to the Contracting Officer is attached as Court Exhibit A. In addition,
two affidavits of other USPS employees directly contradict the Contracting Officer’s conclusion
that Ms. Jennings “conducted [herself] in an unprofessional manner and disrupted the mail
processing operations[.]” Compare Am. Compl. Ex. 5, with Pl. App. A10, A11–12, attached as
Court Exhibit B. Since material facts are at issue as to whether the Contracting Officer’s February
21, 2013 termination was lawful, the Government’s November 13, 2015 Motion For Summary
Judgment is denied.

                                                  3
       respond by January 25, 2013. Your response to the temporary denial of access was
       received via email on January 25, 2013.

       Your response, as well as the background information we received from local Postal
       officials, appears to indicate that in at least two separate instances on January 18,
       2013, you refused to follow instructions provided by an authorized Postal Service
       supervisor. In addition, it appears that you allowed an unauthorized person to gain
       access to the mails,3 which is disruptive to our operations and violates the terms of
       your contract. Finally, your response does not provide any indication that you
       would attempt to avoid these occurences [sic] in the future.

       Consequently, I am permanently denying you access to the mails and all Postal
       Facilities. This permanent denial is effective immediately.

          If you have not already done so, you are instructed to return the ID badge to the
           Administrative Official.
          By copy of this letter, the US Postal Inspection Service is made aware of this
           decision.

       You may appeal this Denial of Access decision within five (5) days of receipt of
       this letter under Management Instruction PO-530-2009-4, Section 172, Appeal
       Process Related to the Investigation of a Contracting Officer. Your appeal letter
       should be mailed to the contracting officer at the address shown at the bottom of
       this letter. The contracting officer will then forward your letter to the Manager,
       Surface Transportation.

Am. Compl. Ex. 7 (emphasis added).

        On February 21, 2013, the Contracting Officer terminated Ms. Jennings for “failure to
perform service in accordance with the terms of [the] [C]ontract.” Gov’t App A66. The reasons
stated by the Contracting Officer for termination, however, were not those listed in the January
18, 2013 Notice of Temporary Denial of Access or the February 14, 2013 Notice of Permanent
Denial of Access. Instead, the Contracting Officer justified Ms. Jennings’ termination, because

       you failed to provide a hired driver4 to operate service on [the Contract]. In a
       telephone conversation later that day, you informed that you would not provide a
       driver to cover service on February 20, 2013. You failed to operate service on

       3
         It appears that the “unauthorized person” was Ms. Jennings’ brother who was delivering
the mail as a substitute supplier, as required by Section C.2.10 and Section C.3.4(j) of the Contract.
Gov’t App. A72 (2/8/13 email from Ms. Jennings to the Contracting Officer) (reporting that
Postmaster Goshe “ran off [Ms. Jennings’] brother who has been running her route”).
       4
         Neither the terms “hired driver” nor “unauthorized person” appear anywhere in the forty-
eight page Contract. Likewise, the term “contract employee,” referred to in Section B.5 of the
Statement of Work also is not defined in the Contract.

                                                  4
       February 19 and February 20, 2013, and turned in your keys required to operate
       service on the route on February 20, 2013.

       Therefore, enclosed is your copy of the PS Form 7440 terminating [the Contract]
       for default. You are liable to the [USPS] for any damages incurred as a result of
       your default, including excess costs for replacement service on the route. A claim
       for any such damages may be made in the future, in a separate final decision.

       This is the decision of the contracting officer[,] pursuant to the Contract Disputes
       Act of 1978 and the clause of your contract entitled Claims and Disputes. You may
       appeal this decision to the Postal Service Board of Contract Appeals by mailing or
       otherwise furnishing written notice (preferably in triplicate) to the contracting
       officer within 90 days from the date you receive this decision. The notice should
       identify the contract by number, reference this decision, and indicate that an appeal
       is intended. Alternately, you may bring an action directly in the United States Court
       of Federal Claims within 12 months from the date you receive this decision.

Gov’t App. A66 (emphasis added).

      Ms. Jennings’ termination was made retroactive effective close of business, February 16,
2013. Gov’t App. A66.

II.    PROCEDURAL HISTORY.

       On February 18, 2014, Ms. Jennings filed a Complaint in the United States Court of Federal
Claims, alleging that: (1) the actions taken by the USPS constitute a wrongful breach of contract
for which Plaintiff is entitled to $11,333.33, pursuant to the liquidated damages clause of the
Contract; (2) the USPS terminated the Contract in bad faith; and (3) Plaintiff is entitled to other
monetary damages in the amount of $170,000.00 (“Compl.”).

        On June 19, 2014, the Government filed a Partial Motion To Dismiss, arguing that Ms.
Jennings’ claims should be dismissed, because they were not presented to a contracting officer or
certified, as required under the Contract Disputes Act (“CDA”).

        On July 18, 2014, Ms. Jennings filed a Motion For Leave To File Amended Complaint,
that the court granted on July 21, 2014.

        On July 21, 2014, Ms. Jennings filed an Amended Complaint, alleging that the claims in
the February 18, 2014 Complaint are the same in the July 21, 2014 Amended Complaint, with the
exception of a claim alleging that Ms. Jennings is entitled to damages in the amount of $56,666.67
for the bad faith termination of the Contact. On August 7, 2014, the Government filed an Answer.

      On November 13, 2015, the Government filed a Motion For Summary Judgment, attaching
a Proposed Findings Of Uncontroverted Fact. On December 14, 2015, Ms. Jennings filed a
Response, together with a Response To Defendant’s Proposed Findings Of Uncontroverted Fact.
On January 13, 2016, the Government filed a Reply (“Gov’t Reply”).

                                                5
III.   DISCUSSION.

       A.      Jurisdiction.

       The Tucker Act authorizes the United States Court of Federal Claims “to render judgment
upon any claim by or against, or dispute with, a contractor arising under [the Contracts Dispute
Act (“CDA”)] section 7104(b)(1) of title 41, including a dispute concerning termination of a
contract . . . on which a decision of the contracting officer has been issued under [the CDA].” 28
U.S.C. § 1491(a)(2).

        The CDA provides that if a contractor has a claim against the Government, based on a
contract with the United States, the contractor first must submit a claim, in writing, to the
contracting officer responsible for that contract. See 41 U.S.C. § 7103(a). If the contracting officer
issues a final decision adverse to the contractor, the aggrieved contractor may bring an action
directly on the claim in the United States Court of Federal Claims. See 41 U.S.C. § 7104(b)(1).
Any such action must be filed within twelve months of receipt of the adverse contracting officer’s
final decision. See 41 U.S.C. § 7104(b)(3).

       On February 21, 2013, the Contracting Officer issued a “‘final decision’ . . . pursuant to
the Contract Disputes Act of 1978 and the clause of [the] [C]ontract entitled Claims and Disputes.”
Gov’t App. A66. As such, the Contracting Officer deemed Ms. Jennings’ January 25, 2013
communication as a CDA claim. On February 18, 2014, Ms. Jennings timely filed a Complaint in
the United States Court of Federal Claims, alleging wrongful termination and seeking $170,000 in
damages, plus attorneys’ fees. Am. Compl. ¶¶ 15, 17. With the consent of the Government (ECF
No. 12), an Amended Complaint was filed on July 21, 2014, alleging wrongful termination, but
$68,000 in damages, plus attorneys’ fees. Gov’t App. A31.

        For these reasons, the court has determined that it has jurisdiction to adjudicate the claims
alleged in the July 21, 2014 Amended Complaint. Accordingly, the Government’s June 19, 2014
Partial Motion To Dismiss is denied.

       B.      Standing.

        The United States Supreme Court has held that “the question of standing is whether the
litigant is entitled to have the court decide the merits of the dispute or of particular issues.”
Warth v. Seldin, 422 U.S. 490, 498 (1975). Standing must be determined “as of the commencement
of suit[.]” Rothe Dev. Corp. v. Dep’t of Def., 413 F.3d 1327, 1334 (Fed. Cir. 2005) (quoting
Lujan v. Defs. of Wildlife, 504 U.S. 555, 570 n.5 (1992)). The party invoking federal jurisdiction
bears the burden of establishing standing. See Lujan, 504 U.S. at 560–61. Specifically, “a plaintiff
must show [that] it has suffered an ‘injury in fact’ that is . . . concrete and particularized and . . .
actual or imminent, not conjectural or hypothetical; . . . the injury is fairly traceable to the
challenged action of the defendant; and . . . it is likely, as opposed to merely speculative, that the
injury will be redressed by a favorable decision.” Friends of the Earth, Inc. v. Laidlaw Envtl.
Servs. (TOC), Inc., 528 U.S. 167, 180–81 (2000) (citations omitted).

         The July 21, 2014 Amended Complaint alleges that Ms. Jennings suffered monetary injury
that is concrete, particularized, and fairly traceable to the Contracting Officer’s February 21, 2013
termination of the March 9, 2012 Contract. Am. Compl. ¶¶ 16–18. Any financial injury

                                                   6
established by Ms. Jennings also can be redressed by a monetary award. For these reasons, the
court has determined that Ms. Jennings has standing to seek an adjudication of the claims alleged
in the July 21, 2014 Amended Complaint.

        C.      Whether Sections C.2.10, C.3.1(6), and C.3.4(j) Of The March 9, 2012
                Contract Are Unenforceable.

        In Fomby-Denson v. Dep’t of the Army, 247 F.3d 1366 (Fed. Cir. 2001), the United States
Court of Appeals for the Federal Circuit, discussing precedential cases from the United States
Supreme Court, described the analysis that the trial court should follow when determining whether
it should enforce a government contract, where “enforcement would be contrary to the ‘public
policy of the United States as manifested in the Constitution, . . . federal statutes and applicable
legal precedents.’” Id. at 1374 (quoting Hurd v. Hodge, 334 U.S. 24, 35 (1948)). Our appellate
court advised, first “there is the rule that the federal courts should refrain from enforcing . . . United
States government . . . contracts when such enforcement would be contrary to the ‘public policy
of the United States as manifested in the Constitution [and] federal statutes[.]’” Fomby-Denson,
247 F.3d at 1375 (quoting Hurd, 334 U.S. at 35).

        In the alternative, the federal courts should

        refuse to enforce contracts where the public policy is reflected in “applicable legal
        precedents.” In other words, the federal courts, as a matter of contract law, will not
        enforce an agreement if the agreement would require violation of established public
        policy norms, even if enforcing the agreement would not violate specific federal
        statute . . . or constitutional requirement. This principle has particular force in cases
        involving United States government contracts where federal contract law is applied,
        see Boyle v. United Techs. Corp., 487 U.S. 500, 512 (1998)[.]

Fomby-Denson, 247 F.3d at 1375 (quoting Hurd, 334 U.S. at 35).

        This case concerns the second category of contract. The contract in this case includes three
provisions, if enforced as a basis for termination, change the nature of an employment agreement
into a contract of adhesion, where “there is great disparity in bargaining power, and where [one
party] receives nothing for the . . . provision[.]” Fuentes v. Shevin, 407 U.S. 67, 94 (1972) (quoting
D.H. Overmyer Co. Inc., of Ohio v. Frick Co., 405 U.S. 174, 188 (1972)). Specifically, these
provisions are ambiguous, are not supported by adequate consideration, and impose an
unreasonable burden on due process.

        Section C.2.10 of the Contract requires the supplier to have “adequate contingency plans
in place[,] should the use of postal facilities be terminated or limited.” Gov’t App. A26 (emphasis
added). The term “adequate contingency plans” is ambiguous and not defined anywhere in the
forty-eight page Contract. In addition, this provision does not specify the circumstances under
which the USPS lawfully may terminate or limit access to a Postal facility or for how long any
such termination or limit to access could last—one week, one month, one year, or longer? More
importantly, this provision provides that: “In no event shall the [USPS] be held liable for, or incur
any additional cost associated with, such use or termination of such use during the contract term.”
Gov’t App. A26. In effect, all costs of a unilateral USPS decision to terminate or limit access are

                                                    7
imposed on the supplier for the term of the Contract—clearly an unreasonable financial burden
and obligation unsupported by consideration—a fatal defect to which the court will return.

        Section C.3.4(j) of the Contract requires that the supplier must perform or provide
substitute performance during the entire period that “any request for relief, claim, appeal or action
arising under the contract” is pending. Gov’t App. A32. Again, this provision affords the USPS
the unilateral ability to impose an unreasonable financial obligation on a supplier who elects to
exercise their due process rights in court to challenge any aspect of the Contract. This imposition
is analogous to the constitutionally banned practice of allowing the garnishment of wages prior to
a court rendering judgment on the validity of a debt—a practice that the United States Supreme
Court has held violates the fundamental principles of due process. See Sniadach v. Family Fin.
Corp. of Bay View, 395 U.S. 337, 342 (1969); see also North Georgia Finishing, Inc. v. Di-Chem,
Inc., 419 U.S. 601, 607 (1975) (holding, as an unconstitutional burden of due process, the practice
of allowing a creditor to impound the bank account of an alleged debtor, based on an affidavit
containing “only conclusory allegations . . . without participation by a judge,” and “no provision
for an early hearing”). Similarly, Section C.3.1(6) of the Contract requires that the supplier assure
the USPS that the supplier will assume continued performance and bear the entire cost of
performance under Section C.2.10 or Section C.3.4(j), or risk termination for default. Of course,
a termination for default will have a significant adverse impact on a supplier’s ability to be hired
for other federal jobs or one in the private sector.

        In this case, Ms. Jennings entered into the March 9, 2012 Contract to perform the services
of a rural mail carrier provider for which she was paid $34,000 per year. Under Sections C.2.10,
C.3.1(6), and C.3.4(j), however, Ms. Jennings also was required to assume potential liability of
approximately $238,000 if she decided to exercise her due process rights to bring an action under
the Contract, or risk being terminated for default. As the RESTATEMENT (SECOND) OF CONTRACTS
§ 79 cmt. e (1981) states, such gross inadequacy of consideration “‘shocks the conscience’ [and]
is often said to be a ‘badge of fraud,’ justifying a denial of specific performance.” Id.; see also id.
§ 78 cmt. c (“Unenforceable promises. A promise may be unenforceable by reason of lack of
consideration or public policy[.]”); Id. § 86(2)(b) (“A promise is not binding . . . to the extent that
its value is disproportionate to the benefit.”).

IV.    CONCLUSION.

       For the reasons discussed herein, the Government’s June 19, 2014 Partial Motion To
Dismiss and November 13, 2015 Motion For Summary Judgment are denied. The Government is
ordered, within thirty days after issuance of this Memorandum Opinion And Order, to show cause
why the court should not determine that Sections C.2.10, C.3.1(6), and C.3.4(j) of the March 9,
2012 Contract are unlawful and unenforceable.5

       5
          If Ms. Jennings’ February 21, 2013 termination was unlawful, later discovered evidence
that she did not have required insurance coverage at all times may support a termination on other
grounds. But, the fact that Ms. Jennings had no prior performance issues and voluntarily acted in
a prompt manner to cure the situation would appear to warrant further consideration by the
Contracting Officer. In any event, Ms. Jennings did not have an opportunity to submit a claim on

                                                  8
        Aside from Ms. Jennings’ case, the court is concerned that the boilerplate terms in Sections
C.2.10, C.3.1(6), and C.3.4(j) may have been invoked in other cases to terminate USPS employees.
Therefore, the court will convene a status conference on July 8, 2016 at 717 Madison Place, N.W.,
Washington, D.C. at 1:30 pm EST to hear argument on the Show Cause Order and whether a
permanent injunction is warranted, in the event the court determines these contract provisions to
be unlawful. In addition to trial counsel for the Department of Justice, the court orders the
attendance of Thomas J. Marshall, General Counsel and Executive Vice President of the United
States Postal Service. Counsel for Ms. Jennings may participate by telephone conference to avoid
the expense of travel.

       IT IS SO ORDERED.

                                                     s/ Susan G. Braden
                                                     SUSAN G. BRADEN
                                                     Judge

which the Contracting Officer could issue a final decision under the CDA on this basis. Therefore,
those issues are not properly before the court.

                                                 9