Court Opinion

ID: 5121611
Source: CourtListenerOpinion
Date Created: 2021-10-28 03:00:12.667817+00
Date Added: 2024-06-11T08:22:23.514850
License: Public Domain

ARMED SERVICES BOARD OF CONTRACT APPEALS
 Appeals of -                                  )
                                               )
 D-STAR Engineering Corporation                )    ASBCA Nos. 62075, 62780
                                               )
 Under Contract No. FA8650-12-C-7243           )

 APPEARANCE FOR THE APPELLANT:                      Mr. S. Paul Dev
                                                     President

 APPEARANCES FOR THE GOVERNMENT:                    Arthur M. Taylor, Esq.
                                                     DCMA Chief Trial Attorney
                                                    Michael T. Patterson, Esq.
                                                     Trial Attorney
                                                     Defense Contract Management Agency
                                                     Chantilly, VA

              OPINION BY ADMINISTRATIVE JUDGE WITWER ON
            THE GOVERNMENT’S MOTION FOR PARTIAL DISMISSAL

        The government moves to partially dismiss these appeals for lack of subject matter
jurisdiction. Specifically, the government seeks to dismiss appellant’s request for a
“penalty” on the basis that it constitutes a request for punitive damages. The government
also seeks to dismiss multiple requests for compensation on the basis that appellant did
not submit these requests to the contracting officer prior to raising them before the Board.
For the reasons set forth below, the Board grants the government’s motion to dismiss
appellant’s request for a penalty. The Board defers the remainder of the government’s
motion until after the presentation of evidence on the merits.

            STATEMENT OF FACTS FOR PURPOSES OF THE MOTION

       1. On July 16, 2012, the Department of the Air Force awarded a cost-plus-fixed-
fee contract to appellant, D-STAR Engineering Corporation (DSEC) (R4, tab 1 at G-1,
G-2). The contract required appellant to build a fuel-to-power generation system for an
unmanned air vehicle (R4, tab 1 at G-42). The Defense Contract Management
Agency (DCMA) administered the contract (R4, tab 1 at G-1), and represents the
government in these appeals.

       2. On November 1, 2013, the government terminated the contract for its
convenience (R4, tabs 4-5). Between December 2013 and November 2015,
appellant submitted several termination settlement proposals (app. supp. R4, tab 3;
R4, tabs 6-8, 10). Appellant’s final proposal, dated November 21, 2015, requests a net
payment of $442,783.01 (R4, tab 10 at G-80).

       3. The parties were unable to reach an agreement regarding the amount, if any,
due to appellant. Accordingly, in December 2015, DCMA asked the Defense Contract
Audit Agency (DCAA) to perform an audit of appellant’s November 2015 proposal
(R4, tab 11 at G-84). DCAA released its report in December 2016, questioning $925,624
in claimed costs and settlement expenses (id.). 1

       4. In February 2018, the DCMA contracting officer issued a debt determination
and demand for repayment letter to appellant (hereinafter “demand letter”) (R4, tab 13).
In the demand letter, the contracting officer asserted that appellant was indebted to the
government in the amount of $482,841 for overpayments (id.). Relevant here, the
demand letter also provided that a penalty would be imposed if appellant failed to satisfy
the debt in full within 90 days. More precisely, the demand letter stated, in pertinent part:

               The debt may be subject to administrative charges in
               accordance with the requirements of 31 U.S.C. 3717(e) . . . .
               If payment is not received within 90 days from the date of
               this letter, the debt will be transferred to the DFAS Columbus
               Debt Management Office (DMO) for collection. If the debt is
               not paid in full within 90 days from the due date stated in the
               demand letter, then in addition to the interest and
               administrative charges, a penalty of 6 percent per annum will
               be assessed on the unpaid principal.

(R4, tab 13 at G-176) (emphasis added)

        5. Approximately one year later, in March 2019, the contracting officer issued a
final decision responding to appellant’s November 2015 proposal (R4, tab 37). The final
decision stated that it rescinded and replaced the February 2018 demand letter (R4, tab 37
at GS-1669). The contracting officer concluded, once again, that appellant was indebted
to the government (R4, tab 37 at GS-1667). The amount of indebtedness, however, was
reduced to $326,583 (id.).

      6. In May 2019, appellant appealed the final decision to the Board, which we
docketed as ASBCA No. 62075.

1
    Per the DCAA report, the net payment requested by appellant ($442,783) less the
          amount of costs and expenses questioned by DCAA ($925,624) resulted in an
          overpayment by the government in the amount of $482,841 (R4, tab 11 at GS-90).
                                             2
       7. After reviewing the 131-page complaint filed by appellant, the Board noted
that appellant raised a number of issues pertaining to the administration and termination
of the contract that did not appear to have been the subject of a claim submitted to the
contracting officer. Consequently, the Board ordered the parties to address whether these
issues were properly before the Board (Bd. Order dtd. Nov. 1, 2019).

        8. In June 2020, appellant informed the Board that it intended to submit a claim
to the contracting officer (app. corr. dtd. June 18, 2020).

        9. On August 17, 2020, appellant submitted a 141-page claim to DCMA
(R4, tab 38), which the contracting officer denied on November 16, 2020 (R4, tab 39).
In the final decision, the contracting officer continued to maintain that appellant was
indebted to the government in the amount of $326,583 (id.).

      10. In January 2021, appellant appealed the final decision to the Board, which we
docketed as ASBCA No. 62780 and consolidated with ASBCA No. 62075.

       11. In February 2021, appellant filed a 60-page complaint in the new appeal.
Importantly, the complaint in ASBCA No. 62780, as well as the previous complaint,
includes a request that the Board impose a “penalty” on the government for
“inappropriate” actions. 2 (ASBCA No. 62075 (62075) compl. at 50-51; ASBCA
No. 62780 (62780) compl. at 12, 48-49)

       12. In April 2021, DCMA filed the instant motion for partial dismissal.
DCMA asserts that the Board should dismiss appellant’s request for a penalty because it
constitutes a request for punitive damages, which the Board has no authority to award
(gov’t mot. at 2, 19-21). 3 DCMA also asserts that the Board should dismiss multiple
requests for compensation raised in ASBCA No. 62075 because the requests were not
submitted to the contracting officer in a claim before being submitted to the Board in
appellant’s complaint (id. at 1-2, 17-19). The government recognizes, however, that
“[t]hese additional counts are largely duplicative of counts currently before the Board

2
  The amount requested in the two complaints differs (see 62075 compl. at 51 (requesting
       a penalty of $94,645); 62780 compl. at 12 (requesting a penalty of $194,033)).
       Based on appellant’s explanation of how it calculated the amounts, we believe the
       difference is due merely to the passage of time (see R4, tab 38 at GS-1699;
       62075 compl. at 51; 62780 compl. at 48).
3
  Although the government focuses almost exclusively on appellant’s request for a
       penalty in ASBCA No. 62780 (see e.g., gov’t mot. at 2-3, 19-21), the government
       also correctly notes that appellant raised the identical request in ASBCA
       No. 62075 (id. at 19 n.3). (See 62075 compl. at 50-51; 62780 compl. at 48-49)
       Thus, the government seeks to strike the penalty request from both appeals (gov’t
       mot. at 19 n.3).
                                            3
under ASBCA No. 62780, which the Board has consolidated with ASBCA No. 62075”
(id. at 18 n.2).

        13. In May 2021, appellant filed an 82-page response to the government’s motion,
in which appellant predominantly addresses the merits of these appeals. In the scant
portions addressing the jurisdictional issues pending before the Board, appellant
seemingly recognizes that the Board lacks the authority to award punitive damages.
(See app. opp’n at 19) (stating that “DSEC Appeal 62780 recognizes that ASBCA may
not be able to award punitive damages against the government”). 4 Regarding the
additional basis for partial dismissal, appellant appears to argue that, even if it failed to
submit a claim prior to filing its complaint in ASBCA No. 62075, any alleged
jurisdictional deficiency was cured by the subsequent submission of its August 2020
claim (see generally app. opp’n at 2, 21). In this regard, appellant argues that its
August 2020 claim incorporated the multiple requests for compensation that the
government now seeks to dismiss. (Id. at 2) (arguing that the “previous DSEC Complaint
62075 [has] been subsumed into and superseded by the Revised DSEC Claim of
17 Aug. 2020, the [final decision] of 16 Nov. 2020 and DSEC Complaint 62780 of
16 Feb. 2021”); (id. at 21) (contending that “the Appeal 62075 has been subsumed and
superseded by Appeal 62780”). For this reason, appellant asserts that the Board should
focus primarily on ASBCA No. 62780 and deny as moot this aspect of the government’s
motion (id. at 2, 21).

       14. In June 2021, the government informed the Board that it did not intend to file a
reply in support of its motion for partial dismissal.

                                          DECISION

      DSEC bears the burden of establishing the Board’s jurisdiction by a
preponderance of the evidence. Globe Trailer Manufacturing, Inc., ASBCA No. 62594,
21-1 BCA ¶ 37,795 at 183,497 (citing Reynolds v. Army & Air Force Exch. Serv.,
846 F.2d 746, 748 (Fed. Cir. 1988)). For the reasons below, we conclude that appellant

4
    In lieu of punitive damages, appellant suggests the possibility of alternative forms of
          compensation under different legal theories (app. opp’n at 19 (identifying “the
          alternative of invoking the Fair Compensation Principle to ensure DSEC has been
          fairly compensated for all costs incurred in good faith as well as for the harm
          caused DSEC by various inactions and inappropriate actions of the government”);
          see id. at 22 (same); see also 62780 compl. at 49 (suggesting that, if the “payment
          of the claimed penalty is prevented by some FARs, then the ASBCA can increase
          the fee payable to DSEC, or include the penalty in an overall amount payable to
          DSEC without breakdown into sub-items”)). These alternative requests are not
          relevant to our resolution of the government’s pending motion. Accordingly,
          we do not address them further herein.
                                               4
has failed to meet its burden with respect to its request for a penalty. We defer ruling on
the remainder of the government’s motion for partial dismissal.

Appellant’s Request for a Penalty

       In its August 2020 claim, appellant requests a “[p]enalty, at the standard rate of
6% per annum, for [the] Government’s unreasonable delays and inappropriate actions
that have caused considerable harm to DSEC” (R4, tab 38 at GS-1672). Appellant
repeats this request nearly verbatim in its two complaints (62075 compl. at 50-51;
62780 compl. at 12, 48-49). Appellant calculates the current amount of the penalty at
$194,033 (62780 compl. at 12).

        At first glance, the exact nature of the requested penalty is difficult to ascertain.
In this regard, appellant’s lengthy claim and pleadings are not a model of clarity.
When describing the requested penalty, appellant often utilizes shifting and ambiguous
language, making it difficult to decipher what the penalty represents. Moreover, the
government’s motion for partial dismissal provides little help. 5

        The Board is mindful, however, that appellant is appearing without a lawyer,
entitling it to certain leniencies afforded to parties proceeding pro se. Steffen v. United
States, 995 F.3d 1377, 1380 (Fed. Cir. 2021) (acknowledging “the long-held principle
that pleadings drafted by pro se litigants are generally held to ‘less stringent standards’
than pleadings filed by trained attorneys” (quoting Haines v. Kerner, 404 U.S. 519,
520-21 (1972))); Butt v. United States, No. 05-1187C, 2007 WL 5161797, at *2 (Fed. Cl.
Feb. 12, 2007) (“If the court were to require pro se parties to make their arguments as
clearly and in the same format as those made by counsel, it would be a simple matter to
dismiss virtually every pro se case.”). For this reason, and to ensure that justice is done,
the Board has carefully examined appellant’s filings to determine the exact nature of the
penalty requested and to discharge our responsibility to extract legal significance from
the various theories appellant advances without making appellant’s case for it. Having
done so, however, we conclude that appellant has failed to meet its burden of establishing
the Board’s jurisdiction. John Shaw LLC d/b/a Shaw Building Maint., ASBCA
No. 61379, 61585, 19-1 BCA ¶ 37,216 at 181,185 (“While pro se litigants, such as
appellant, are often held to less stringent pleading standards than by those represented by
counsel, they are not exempt from meeting jurisdictional prerequisites.”) (citation
omitted).

5
    DCMA’s argument is comprised of a recitation of case law regarding punitive damages
       followed by a cursory statement that appellant’s claim is “most certainly a request
       for the award of punitive damages” (gov’t mot. at 21). Thus, the government
       leaves to the Board the task of interpreting the exact nature of the requested
       penalty and determining whether the penalty is “most certainly” a request for
       punitive damages.
                                               5
        As explained above, appellant often employs shifting and ambiguous language
when discussing the requested penalty. For instance, in various places, appellant uses
language suggesting that the penalty it seeks might represent interest for delayed
payments (see, e.g., R4, tab 38 at GS-1698-99; 62780 compl. at 48) or costs incurred as a
result of an alleged breach of the implied duty of good faith and fair dealing (see e.g., R4,
tab 38 at GS-1698; 62780 compl. at 48-49). After a close review of appellant’s
August 2020 claim and its two complaints, however, we conclude that the requested
penalty is neither. 6 Rather, we conclude that appellant is requesting a penalty under the
penalty provisions of the Debt Collection Act, 31 U.S.C. § 3717(e).

       More specifically, appellant points the Board to the government’s February 2018
demand letter—which provides that “a penalty of 6 percent per annum will be assessed
on the unpaid principal” under 31 U.S.C. § 3717(e) if appellant’s debt is not paid in full
within 90 days—and asks the Board to impose the same penalty against the government
(see R4, tab 38 at GS-1699 (quoting R4, tab 13 at G-176); 62075 compl. at 50-51; 62780
compl. at 48). As an example, in the complaint filed in ASBCA No. 62075, appellant
argues, as follows:

                Considering that it is the government terminations team that
                has repeatedly delayed the processes, taken no action when
                needed, taken unreasonable actions, made false allegations,
                engaged in repeated delaying tactics, and done anything and

6
    Briefly, we conclude that the penalty is not a request for interest because appellant
         expressly requests “interest on payments due” in addition to a “penalty, at a
         standard rate, payable by the Government to DSEC” (R4, tab 38 at GS-1671).
         (See id. at GS-1672 (requesting interest for the government’s delayed payment
         of appellant’s incurred costs as well as a “penalty . . . for [the] Government’s
         unreasonable delays and inappropriate actions that have caused considerable
         harm to DSEC”); see also id. at GS-1674, 1704; 62075 compl. at 50; 62780
         compl. at 9, 12)

         Similarly, although there is isolated language that, at first glance, might suggest
         the penalty represents a request for breach damages, appellant explains that the
         government “is liable to pay DSEC both compensation for harm caused as well as
         a penalty for inappropriate behavior” (R4, tab 38 at GS-1698) (emphasis added).
         Appellant calculates the former at $2,949,426, the latter at $194,033 (id.).
         Importantly, appellant also expressly represents that the requested penalty does not
         include any incurred costs. (62780 compl. at 48 (clarifying that the “claim for the
         penalty to be paid by the government for unreasonable delays and inappropriate
         actions by the government is not an ‘expense’ incurred by DSEC, but is
         nevertheless payable by the government due to delayed payment” (emphasis
         added))).
                                               6
              everything possible to avoid paying DSEC for costs incurred
              by DSEC in good faith, should the government be assessed
              with administrative changes and 6% [per annum] penalties?
              DSEC believes such determination by the ASBCA would be
              fair and reasonable. If the ASBCA determines that the
              government should, indeed, pay the same penalty, then the
              penalty at 6% [per annum] over 42.75 months, from
              23 Nov 2015 to 16 Jun 2019, for a principal of $442,783,
              would be $94,645.

(62075 compl. at 51) (emphasis omitted) Appellant makes the same argument in its
August 2020 claim and complaint filed in ASBCA No. 62780, increasing its calculation of
the penalty to $194,033 (R4, tab 38 at GS-1699 (asserting that “the government be
assessed . . . the same 6% [per annum] penalties” as those provided for in the
government’s demand letter); 62780 compl. at 48 (contending that “[t]his penalty is
similar to, and calculated at the same rate as, that indicated by the [termination contracting
officer], as being payable to DSEC, in the [] Demand letter of 12 Feb 2018”)). The Debt
Collection Act, however, does not provide jurisdiction to the Board to award such
penalties.

        The Act requires agency heads to “assess on a claim owed by a person . . .
a penalty charge of not more than 6 percent a year for failure to pay a part of a debt more
than 90 days past due.” 31 U.S.C. § 3717(e)(2). For purposes of subsection 3717(e),
a “claim” or “debt” constitutes “any amount of funds or property that has been
determined by an appropriate official of the Federal Government to be owed to the
United States by a person, organization, or entity other than another Federal agency.”
31 U.S.C. § 3701(b)(1). The term “person” expressly excludes an agency of the Federal
government. 31 U.S.C. § 3701(c). “The purpose of the act was to ensure that the
government did not lose the benefit of the use of monies owed to it by contractors[.]”
Cap. Dev. Co. v. United States, 49 Fed. Cl. 178, 186 (2001) (citing S. Rep. No. 97-378
at 3) aff’d sub nom. Seaboard Lumber Co. v. United States, 308 F.3d 1283 (Fed.
Cir. 2002).

       Appellant points to no provision in the Act authorizing the Board, apart from its
Contract Disputes Act (CDA) jurisdiction, to decide disputes over the payment of
penalties on federal agency debts, nor is any such provision apparent to the Board.
The sole provision of the Act addressing penalties, subsection 3717(e), prescribes
payment of penalties to the government. This provision does not mention government
payment of penalties, and does not confer jurisdiction on any contract appeals board to
decide issues of payment of such penalties. Thus, we conclude that we do not possess
jurisdiction to entertain appellant’s claim. See Lockheed Martin Corp., ASBCA
No. 53834, 03-2 BCA ¶ 32,304 at 159,834-35 (holding that the Debt Collection Act does

                                              7
not confer jurisdiction on the Board to adjudicate disputes regarding interest payments
under section 3717).

        As a final matter, we also conclude that penalties assessed under
subsection 3717(e) are intended to be punitive. See Am. Airlines, Inc. v. United States,
77 Fed. Cl. 672, 684 (2007) (finding that penalties assessed under 31 U.S.C. § 3717,
unlike interest and administrative costs assessed under the same section, are “imposed as
a punitive measure for late payment”). Thus, as the government argues in its motion
(albeit in summary fashion), appellant seeks the award of punitive damages. Damages,
Black’s Law Dictionary (11th ed. 2019) (Punitive damages are those that are “assessed
by way of penalizing the wrongdoer.”).

       Appellant, however, has identified no basis for such a demand. “Absent express
consent of Congress, no punitive damages can be recovered against the United States.”
John Shaw LLC d/b/a Shaw Bldg. Maint., ASBCA No. 61379, 61585, 19-1 BCA
¶ 37,216 at 181,185 (quoting Janice Cox d/b/a Occupro Ltd., ASBCA No. 50587,
01-1 BCA ¶ 31,377 at 154,930-31); see also Mastrolia v. United States, 91 Fed. Cl. 369,
382 (2010) (“The United States has not waived sovereign immunity with regard to
punitive damages.”). The CDA, under which we derive our jurisdiction, does not contain
such a waiver. See John Shaw LLC d/b/a Shaw Bldg. Maint., 19-1 BCA ¶ 37,216
at 181,185 (“Congress has not expressly consented to the Board awarding punitive
damages.”). Accordingly, we dismiss appellant’s request for a penalty because it
constitutes a request for punitive damages, which the Board has no authority to award.

Appellant’s Requests for Compensation in ASBCA No. 62075

        The government also moves to dismiss several requests for compensation raised
in ASBCA No. 62075 because the requests were not submitted to the contracting officer
in a claim before being submitted to the Board in appellant’s complaint. DSEC argues
that these requests were subsequently submitted to the contracting officer in the
August 2020 claim and are pending before the Board in ASBCA No. 62780—an
argument with which the government generally concurs. (Gov’t mot. at 18 n.2; see also
id. at ex. G-1 (comparing the two complaints)) Given these positions, and for the sake of
efficiency, we defer ruling on this aspect of the government’s motion to dismiss until
after the presentation of evidence on the merits. 7

7
    The Board has compared appellant’s complaint in ASBCA No. 62075 to its
         August 2020 claim and the resulting complaint in ASBCA No. 62780, and we
         conclude that the requests DCMA seeks to dismiss are, for the most part, included
         in the August 2020 claim and subsequent complaint. That said, without further
         clarification and briefing from the parties—in particular from appellant—
                                              8
                                    CONCLUSION

      The government’s motion to dismiss appellant’s request for a penalty is granted.
The Board strikes appellant’s request for a penalty from ASBCA Nos. 62075 and 62780.
We defer ruling on the remainder of the government’s motion.

      Dated: October 14, 2021

                                                  ELIZABETH WITWER
                                                  Administrative Judge
                                                  Armed Services Board
                                                  of Contract Appeals

 I concur                                           I concur

 RICHARD SHACKLEFORD                                J. REID PROUTY
 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. 62075, 62780, Appeals of
D-STAR Engineering Corporation, rendered in conformance with the Board’s Charter.

      Dated: October 14, 2021

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

      we cannot say with certainty that the two appeals are entirely duplicative in this
      respect.
                                            9