Court Opinion

ID: 7374730
Source: CourtListenerOpinion
Date Created: 2022-07-28 15:00:40.780921+00
Date Added: 2024-06-11T16:21:01.643609
License: Public Domain

Case: 21-2169    Document: 38     Page: 1   Filed: 07/28/2022

        NOTE: This disposition is nonprecedential.

   United States Court of Appeals
       for the Federal Circuit
                  ______________________

  MICROTECHNOLOGIES LLC, DBA MICROTECH,
                Appellant

                             v.

      UNITED STATES ATTORNEY GENERAL,
                     Appellee
              ______________________

                        2021-2169
                  ______________________

     Appeal from the Civilian Board of Contract Appeals in
 No. 6772, Administrative Judge Kyle E. Chadwick, Admin-
 istrative Judge Allan H. Goodman, Administrative Judge
 Jerome M. Drummond.
                  ______________________

                  Decided: July 28, 2022
                  ______________________

     ZACHARY DAVID PRINCE, Smith, Pachter, McWhorter,
 PLC, Tysons Corner, VA, argued for appellant. Also repre-
 sented by JOSEPH J. PETRILLO.

     BRYAN MICHAEL BYRD, Commercial Litigation Branch,
 Civil Division, United States Department of Justice, Wash-
 ington, DC, argued for appellee. Also represented by BRIAN
 M. BOYNTON, PATRICIA M. MCCARTHY.
                   ______________________
Case: 21-2169    Document: 38      Page: 2    Filed: 07/28/2022

 2                               MICROTECHNOLOGIES. LLC v.
                          UNITED STATES ATTORNEY GENERAL

     Before CHEN, SCHALL, and STOLL, Circuit Judges.
 STOLL, Circuit Judge.
     Microtechnologies LLC (MicroTech) appeals the U.S.
 Civilian Board of Contract Appeals’ summary judgment
 that MicroTech is not entitled to recover costs under the
 applicable termination clause. Because MicroTech cannot
 show that the costs it seeks to recover were reasonable
 charges that resulted from the termination, as required by
 the parties’ contract, we affirm.
                         BACKGROUND
                               I
     On September 25, 2017, MicroTech entered into an
 agreement with the Executive Office for United States At-
 torneys (EOUSA or government) pursuant to MicroTech’s
 government-wide acquisition contract for information tech-
 nology products and services. The agreement, effective
 September 27, 2017, contemplated that MicroTech would
 provide the government with perpetual software licenses
 and software maintenance for Nuix. J.A. 159–64. The
 agreement’s period of performance included one base year
 (September 29, 2017, to September 28, 2018) and two po-
 tential option years (September 29, 2018, to September 28,
 2019; and September 29, 2019, to September 28, 2020).
 J.A. 159–64. The government could exercise one or both of
 the option years at its discretion. J.A. 163–64. The gov-
 ernment agreed that for each option year it exercised, it
 would pay MicroTech $688,051.80 for software mainte-
 nance. J.A. 162.
     On September 29, 2017, the first day of the base year
 of performance, MicroTech purchased the perpetual soft-
 ware licenses and software maintenance not just for the
 base year, but also for both option years. Purchasing mul-
 tiple years in bulk reduced the cost of the software licenses
 and software maintenance. MicroTech “purchased the . . .
 maintenance for the option[] years at its own risk,” “the
Case: 21-2169    Document: 38      Page: 3    Filed: 07/28/2022

 MICROTECHNOLOGIES. LLC v.                                  3
 UNITED STATES ATTORNEY GENERAL

 risk being that the Government would not exercise those
 option years.” Appellant’s Br. 19.
     As the end of the base year approached, MicroTech sent
 multiple emails to the EOUSA contracting officer’s repre-
 sentative to inquire whether it would exercise the first op-
 tion year. J.A. 186–87. On September 28, 2018, the day
 the base year of performance ended, the EOUSA contract-
 ing officer’s representative left MicroTech a voicemail stat-
 ing that the government would not be exercising the first
 option under the agreement. J.A. 3, 220. MicroTech’s fi-
 nancial services manager apparently did not listen to that
 voicemail until October 1, 2018. J.A. 220, 351. On Sunday,
 September 30, 2018—two days after the base year of per-
 formance ended—MicroTech’s financial services manager
 again emailed, this time contacting EOUSA’s Chief of Op-
 erations, indicating that MicroTech had not yet heard back
 regarding the first option year. J.A. 206, 306. Later that
 day, the EOUSA Chief of Operations, a contracting officer,
 sent a proposed bilateral contract modification (modifica-
 tion 2), which stated in relevant part: “To exercise option
 year 1 for Nuix e-Discovery Workstation Perpetual Soft-
 ware License for the period of September 29, 2018, through
 September 28, 2019, in the amount of $688,051.80.” J.A. 2,
 189–91, 208. MicroTech signed and returned modifica-
 tion 2 that day at approximately 9:10 PM.
     At 8:37 AM the next morning, Monday, October 1,
 2018, the assistant director of EOUSA acquisitions staff,
 also a contracting officer, sent an email informing Micro-
 Tech that the option year had been erroneously exercised.
 A proposed modification 3 was attached to this email,
 which read in relevant part: “The purpose of this modifica-
 tion is to terminate Option Year One. The option year was
 exercised in error.” J.A. 216. MicroTech did not sign this
Case: 21-2169     Document: 38      Page: 4   Filed: 07/28/2022

 4                                MICROTECHNOLOGIES. LLC v.
                           UNITED STATES ATTORNEY GENERAL

 modification. The next day, EOUSA sent a signed, unilat-
 eral modification terminating the option year. 1
     MicroTech sent a letter to the EOUSA claiming that it
 owed MicroTech $688,051.50, the price of software mainte-
 nance for the first option year, due to the government’s ter-
 mination. The government denied MicroTech’s claim.
 MicroTech filed an appeal with the Civilian Board of Con-
 tract Appeals (Board).
                               II
      Before the Board, the parties cross-moved for summary
 judgment regarding whether MicroTech was entitled to its
 claimed termination costs. Both parties relied on the ap-
 plicable termination-for-convenience clause, FAR 52.212-
 4(l). That clause reads in relevant part:
     The Government reserves the right to terminate
     this contract . . . for its sole convenience. In the
     event of such termination, the Contractor shall im-
     mediately stop all work hereunder . . . . [T]he Con-
     tractor shall be paid a percentage of the contract
     price reflecting the percentage of the work per-
     formed prior to the notice of termination, plus rea-
     sonable charges the Contractor can demonstrate to
     the satisfaction of the Government . . . have

     1   This modification states that it is pursuant to Fed-
 eral Acquisition Regulation (FAR) 52.249-4, which author-
 izes the government to terminate non-commercial item
 contracts for its convenience. The parties agree that this
 citation is an error, and that the modification is actually
 pursuant to FAR 52.212-4(l), the commercial item con-
 tracts termination for convenience clause. Appellant’s
 Br. 16; Appellee’s Br. 5–6; see also J.A. 29 (FAR 52.212-4(l),
 “Termination for the Government’s convenience” clause, in
 the parties’ original, government-wide acquisition con-
 tract).
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 MICROTECHNOLOGIES. LLC v.                                    5
 UNITED STATES ATTORNEY GENERAL

       resulted from the termination . . . . The Contractor
       shall not be paid for any work performed or costs
       incurred which reasonably could have been
       avoided.
 Id.
     MicroTech argued to the Board that the cost of software
 maintenance for option year one was a “reasonable charge”
 “result[ing] from the termination” that could not “have
 been avoided.” J.A. 3. Specifically, MicroTech alleged that
 when the government terminated modification 2, Micro-
 Tech had already incurred the cost for software mainte-
 nance for option year one—maintenance it was required to
 provide by the terms of that modification. J.A. 3–4. And
 because Nuix only sells software maintenance in one-year
 increments and it does not refund software maintenance
 costs once paid, MicroTech argued that it could not have
 further mitigated its costs. J.A. 4.
     In support of its motion, MicroTech provided evidence
 that Nuix software maintenance could only be purchased
 in increments of one year and that its purchase of software
 maintenance was nonrefundable. This evidence included
 Nuix’s Support and Maintenance Service Agreement and a
 series of declarations from MicroTech’s Vice President
 Chad Cobbs. J.A. 153–54, J.A. 345–48, 404–05, 418–19.
     For its part, the government argued that MicroTech
 could not recover any costs under the applicable termina-
 tion clause. J.A. 4. The government explained that the
 termination clause allows for recovery of: (1) the percent-
 age of work done prior to termination plus (2) reasonable
 charges resulting from termination. The government ar-
 gued that MicroTech could not recover under the first
 prong because modification 2 only existed for 12 hours, and
 MicroTech had not shown it performed any work during
 that time. J.A. 5. Similarly, the government argued, Mi-
 croTech could not recover under the second prong because
 the cost of software maintenance for option year one could
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 6                               MICROTECHNOLOGIES. LLC v.
                          UNITED STATES ATTORNEY GENERAL

 not be a reasonable charge resulting from termination. Id.
 This was so, according to the government, because Micro-
 Tech purchased that year of software maintenance on the
 first day of the base year period of performance—far before
 modification 2 was entered into, much less terminated.
 J.A. 4–5.
      The Board agreed with the government. MicroTech
 purchased three years of software maintenance at the be-
 ginning of the base year, “with no assurance that the option
 years would be exercised,” the Board noted. J.A. 5. It ex-
 plained that the cost for the latter two years of software
 maintenance thus could not have been the “result [of] the
 issuance of modification 2.” J.A. 5. Further, the Board de-
 termined that MicroTech had not proven “that the one year
 of software maintenance at issue that was purchased at the
 beginning of the base year was required under the contract
 when purchased.” J.A. 6. The Board also determined there
 “is no evidence that [MicroTech] took action to activate or
 apply the software maintenance upon receipt of modifica-
 tion 2, or during the approximately twelve-hour period”
 during which modification 2 was valid, which “would have
 resulted in [MicroTech] supplying the software mainte-
 nance to the Government pursuant to modification 2.”
 J.A. 6. The Board thus determined that MicroTech was not
 entitled to termination costs under FAR 52.212-4(l) as a
 matter of law and accordingly granted summary judgment
 in the government’s favor.
    MicroTech appeals.        We have jurisdiction under
 41 U.S.C. § 7107(a)(1)(A).
                        DISCUSSION
     We review Board decisions under 41 U.S.C. § 7107. We
 review the Board’s conclusions of law de novo, including its
 grant of summary judgment. § 7107(b)(1); see also Rex
 Sys., Inc. v. Cohen, 224 F.3d 1367, 1371 (Fed. Cir. 2000).
 Summary judgment may only be granted if the moving
 party shows that there is no genuine dispute regarding any
Case: 21-2169    Document: 38      Page: 7    Filed: 07/28/2022

 MICROTECHNOLOGIES. LLC v.                                  7
 UNITED STATES ATTORNEY GENERAL

 material fact and that it is entitled to judgment as a matter
 of law. Fed. R. Civ. P. 56(a). In evaluating a summary
 judgment motion, we must resolve all reasonable factual
 inferences in the non-movant’s favor. See Anderson v. Lib-
 erty Lobby, Inc., 477 U.S. 242, 255 (1986).
     On appeal, MicroTech asserts that it was immediately
 obligated to provide software maintenance when modifica-
 tion 2 was signed (i.e., at 9:10 PM on Sunday evening). As
 a result, MicroTech argues, its purchase of software
 maintenance for option year one—a purchase it made a
 year beforehand—was a “reasonable charge[]” that “re-
 sulted from the termination” under FAR 52.212-4(l). Ap-
 pellant’s Br. 15–19. In other words, MicroTech contends
 that the government’s liability for the cost of software
 maintenance for option year one was immediately trig-
 gered upon the signing of modification 2, despite MicroTech
 having incurred that charge one year prior. Id. at 19.
     The Board disagreed. It reasoned that, among other
 things, MicroTech failed to prove “that the one year of soft-
 ware maintenance at issue that was purchased at the be-
 ginning of the base year was required under the contract
 when purchased.” J.A. 6. Accordingly, the Board deter-
 mined that MicroTech “ha[d] not proved that the software
 maintenance at issue was supplied to the [g]overnment un-
 der modification 2,” and therefore the cost of that mainte-
 nance was “not a cost arising from the termination of
 modification 2.” Id.
     When properly resolving all reasonable factual infer-
 ences in MicroTech’s favor, we agree with MicroTech that
 Nuix software maintenance can only be purchased in one-
 year increments and that MicroTech’s purchase of software
 maintenance for option year one was nonrefundable. See
 J.A. 345 (Cobbs Decl. ¶ 2) (“Nuix does not sell [] software
 maintenance . . . for a period of less than one year.”);
 J.A. 348; J.A. 153 ¶ 2 (explaining that fees paid to Nuix are
 “non-refundable once paid”).
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 8                               MICROTECHNOLOGIES. LLC v.
                          UNITED STATES ATTORNEY GENERAL

      Nonetheless, we conclude that the Board did not err in
 granting summary judgment that MicroTech is not entitled
 to recover costs under the applicable termination clause.
 The Board correctly held that the cost of software mainte-
 nance for option year one was not a “reasonable charge[]”
 that “resulted from the termination,” as required for recov-
 ery under FAR 52.212-4(l). MicroTech incurred the cost for
 software maintenance for option year one at the beginning
 of the base year period of performance—well before modifi-
 cation 2 was signed and then terminated. Indeed, Micro-
 Tech itself acknowledges that the cost was not required
 under any contract when it was incurred. Appellant’s
 Br. 19 (MicroTech conceding that it “understood that it
 purchased the . . . maintenance for the option[] years at its
 own risk”). Accordingly, even assuming that the software
 maintenance could only be purchased in one-year incre-
 ments and that MicroTech’s purchase was nonrefundable,
 MicroTech cannot show that the cost of software mainte-
 nance for the first option year “resulted from” the govern-
 ment’s termination of modification 2. Thus, under the
 specific, undisputed facts in this case, the Board correctly
 entered summary judgment in the government’s favor.
                        CONCLUSION
     We have considered MicroTech’s remaining arguments
 but do not find them persuasive. For the foregoing reasons,
 we affirm the Board’s summary judgment.
                        AFFIRMED