Court Opinion

ID: 4275011
Source: CourtListenerOpinion
Date Created: 2018-05-14 17:00:04.786833+00
Date Added: 2024-06-11T09:24:15.256156
License: Public Domain

ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeal of --                                 )
                                             )
 Cooper/Ports America, LLC                   )      ASBCA No. 61461
                                             )
Under Contract No. HTC711-15-D-R036          )

APPEARANCES FOR THE APPELLANT:                      W. Barron A. Avery, Esq.
                                                    William T. DeVinney, Esq.
                                                    William B. O'Reilly, Esq.
                                                    Katherine L. McKnight, Esq.
                                                     BakerHostetler LLP
                                                     Washington, DC

APPEARANCES FOR THE GOVERNMENT:                     Jeffrey P. Hildebrant, Esq.
                                                     Air Force Deputy Chief Trial Attorney
                                                    Caryl A. Potter III, Esq.
                                                    Lt Col Byron G. Shibata, USAF
                                                    Maj Sondra B. Nensala, USAF
                                                    Christopher S. Cole, Esq.
                                                    Danielle A. Runyan, Esq.
                                                     Trial Attorneys

      OPINION BY ADMINISTRATIVE JUDGE O'SULLIVAN ON THE
    GOVERNMENT'S MOTION TO DISMISS FOR LACK OF JURISDICTION

       The government has filed a motion to dismiss this appeal for lack of subject
matter jurisdiction. It argues that appellant, Cooper/Ports America, LLP (CPA) cannot
bring the claim that is the subject of this appeal because CPA was not the "contractor"
within the meaning of the Contract Disputes Act at the time the claim accrued. CPA
opposes the government's motion and argues that under the novation agreement
executed by the government, it has the legal right to assert claims that pre-date tlie
novation agreement.

          STATEMENT OF FACTS FOR PURPOSES OF THE MOTION

       On 28 January 2015, the government awarded Contract No. HTC71 l-15-D-R036
(the contract) to Shippers Stevedoring Co. ("Shippers") for stevedoring and related
terminal services in support of the United States Transportation Command (gov't mot.
at 2). Shippers soon began to incur financial losses on the contract and entered into
negotiations with other firms to take over the contract. On 15 November 2016, CPA,
Shippers, and the government executed a novation agreement with an effective date of
30 September 2016 (id. at 3). On or about 1 October 2016, CPA took over performance
of the contract pursuant to the novation agreement (id. at 2). CPA has since filed a
number of claims against the government, but the claim that is the subject of this appeal
is a claim for unilateral mistake in bid based, in part, on the fact that Shippers' bid was
63% below that of the next lowest bidder, Ports America, one ofCPA's owners, and
contained mistakes that should have been apparent to the government (R4, tab 21).

        Pursuant to the novation agreement, all three parties agreed (in relevant part)
that:

              ( 1) The Transferor [Shippers] confirms the transfer to the
              Transferee [CPA], and waives any claims and rights
              against the Government that it now has or may have in the
              future in connection with the contracts.

              (2) The Transferee agrees to be bound by and to perform
              each contract in accordance with the conditions contained
              in the contracts. The Transferee also assumes all
              obligations and liabilities of, and all claims against, the
              Transferor under the contracts as if the Transferee were the
              original party to the contracts.

              (3) The Transferee ratifies all previous actions taken by
              the Transferor with respect to the contracts, with the same
              force and effect as if the action had been taken by the
              Transferee.

              (4) The Government recognizes the Transferee a:s the
              Transferor's successor in interest in and to the contracts.
              The Transferee by this Agreement becomes entitled to all
              rights, titles, and interests of the Transferor in and to the
              contracts as if the Transferee were the original part'/ to the
              contracts. Following the effective date of this Agreement,
              the term "Contractor," as used in the contracts, shall refer
              to the Transferee.

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II                 (5) Except as expressly provided in this Agreement,
                   nothing in it shall be construed as a waiver of any rights of
                   the Government against the Transferor.

     (R4, tab 17 at 8-9) The language of the novation agreement closely tracks the
     suggested format contained in FAR Part 42.1204.

                                             DECISION

             The government contends that CPA lacks the required privity of contract to
     qualify as a "contractor" with standing to pursue a claim that accrued at a time that it
     was not a party to the contract (i.e., pre-novation) (gov't mot. at 6). As amplified in its
     reply brief, the government asserts that there must have been an express assignment of
     that claim to which the government consented in order for the Board to find a valid
     government waiver of the statutory prohibition against assignment of claims (gov't
     reply at 2-3).

            For its part, CPA responds that both the plain language of the nova ti on
     agreement and Board legal precedent make it clear that CPA, as the successor in
     interest under the contract, has the right to assert a claim accruing prior to the novation
     (app. resp. at 1).

             Pursuant to the Contract Disputes Act of 1978 (CDA), 41 U.S.C. §§ 7101 et seq.,
     the Board's jurisdiction extends only to appeals brought by a "contractor." A
     "contractor" is defined as "a party to a Government contract other than the
     Government." 41 U.S.C. §7101(7). In the instant case, CPA entered into a novation
     agreement with both the government and its predecessor, Shippers, in which Shippers
     waived any claims and rights it might have against the government, and the
     government recognized CPA as the "successor in interest in and to the contracts,"
     "entitled to all rights, titles and interests of the Transferor in and to the contracts as if
     the Transferee were the original party to the contracts" (R4, tab 17 at 8-9). The Board
     has previously held that a successor in interest under a novation agreement, pursuant to
     which it is "entitled to all the rights" of its predecessor as if it were "the original party"
     to the contract, is recognized by the government as the successor in interest for all
     purposes, including the right to pursue any claims its predecessor could have pursued.
     Vought Aircraft Company, ASBCA No. 47357, 95-1 BCA ,r 27,421 at 136,666.

            The government argues that, notwithstanding the novation agreement and our
     decision in Vought, the Federal Circuit's decision in Delmarva Power & Light Co. v.
     United States, 542 F.3d 889 (Fed. Cir. 2008) requires that there must have been an
     express assignment of a claim, to which the government consented, in order for the
     Board to find a valid government waiver of the statutory prohibition against

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assignment of claims (gov't reply at 2-3). We disagree. There was no novation
agreement in Delmarva to which the government was a party. Delmarva stands for the
proposition that, in the absence of government consent by way of a novation
agreement, the government may, in other ways, recognize an assignment of claims. In
that case, the government had filed with the Court of Federal Claims a document
purporting to accept the assignment of claims contained in a Transfer Agreement to
which it had not been a party. In upholding the decision of the Court of Federal
Claims validating the assignment, the Federal Circuit followed the analysis and
reasoning of its predecessor, the Court of Claims, in Tuftco Corp. v. United States,
614 F.2d 740 (Ct. Cl. 1980).

       The Anti-Assignment Act consists of two separate statutory provisions.
Fireman's Fund Ins. Co. v. England, 313 F.3d 1344, 1349 (Fed. Cir. 2002); Tuftco
Corp., 614 F.2d at 744. One provision, 41 U.S.C. § 15(a) (now 41 U.S.C. § 6305)
prohibits the assignment of contracts, but allows monies due from the United States to
be assigned to a financing institution. The other, 31 U.S.C. § 3727(a) prohibits the
assignment of claims against the United States and contains a similar exception for
assignments to financing institutions. Both Delmarva and Tuftco recognized that the
government may validly waive the application of the Anti-Assignment Act; in each
case the issue was whether the government, by its actions, had in fact done so.

        Tuftco involved the assignment of contracts rather than the assignment of
 claims and, as in Delmarva, there was no novation agreement. The court observed that
while it is unclear precisely what actions by the government will constitute recognition
of an assignment, "[t]he soundest and most accepted method of establishing
recognition by the Government is for all three parties to enter into a novation
agreement." Tuftco Corp., 614 F.2d at 745. However, it continued, a novation
agreement is not the exclusive means of establishing recognition, and where the
government's course of conduct, its statements to the parties, and its dealings with the
assignee indicate it recognizes the assignee as the contractor, recognition has been
found. Id. Tuftco proceeded to find that the actions of the government were sufficient
to constitute recognition of the assignments.

       In this case, it is unnecessary for us to conduct such an analysis because the
government expressly recognized CPA as the "contractor" in the novation agreement.
Moreover, it recognized CPA as "entitled to all rights, titles and interests of the
Transferor in and to the contracts as if the Transferee were the original party to the
contracts." To read this broad recognition as excluding the right to pursue a claim
accruing to the original contractor, as the government urges us to do in this case,
would do violence to the clear intent of the agreement. If the tables were turned, and
CPA had urged us to limit its assumption of "all obligations and liabilities of, and all
claims against, the Transferor under the contracts as if the Transferee were the original

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party to the contracts" to those liabilities or claims expressly spelled out in the
agreement by the government, we doubt the government would acquiesce.

       That the reciprocal provision entitling the transferee to "all rights, titles, and
interests" of the transferor does not expressly include the word "claims" does not
change our conclusion. We reject as lacking merit the government's argument that the
absence of the word "claims" in the paragraph recognizing CPA as the successor in
interest reflects an intent on the part of the drafters of the FAR to exclude from the
novation agreement a transferee's ability to pursue pre-novation claims (gov't reply at
7-8). The right to pursue pre-novation claims is well within the government's
recognition that CPA possesses all "rights, titles, and interests" as if it "were the
original party to the contracts." Vought Aircraft Co., 95-1 BCA ,r 27,421 at 136,666.

       The government's motion to dismiss for lack of jurisdiction is denied.

       Dated: 2 May 2018

                                                    Administrative Judge
                                                    Armed Services Board
                                                    of Contract Appeals

 !concur~                                           I concur ..:/__,,,   /Y
                                                     ~
 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 No. 61461, Appeal of
Cooper/Ports America, LLC, rendered in conformance with the Board's Charter.

       Dated:

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

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