Court Opinion

ID: 209911
Source: CourtListenerOpinion
Date Created: 2011-03-13 08:01:14+00
Date Added: 2024-06-11T17:27:58.661955
License: Public Domain

NOTE: This disposition is nonprecedential.

United States Court of Appeals for the Federal Circuit
                                     2008-1033

                                  NOVA EXPRESS

                                                    Appellant,

                                          v.

                     John E. Potter, POSTMASTER GENERAL,

                                                    Appellee.

      Philip Emiabata, as Nova Express, of Austin, Texas, pro se.

      Joseph A. Pixley, Trial Attorney, Commercial Litigation Branch, Civil Division,
United States Department of Justice, of Washington, DC, for respondent. With him on
the brief were Jeffrey S. Bucholtz, Acting Assistant Attorney General, Jeanne E.
Davidson, Director, and Steven J. Gillingham, Assistant Director.

Appealed from: United States Postal Service Board of Contract Appeals

Administrative Judge Norman O. Menegat
                        NOTE: This disposition is nonprecedential.

 United States Court of Appeals for the Federal Circuit

                                          2008-1033

                                    NOVA EXPRESS

                                                       Appellant,

                                             v.

                      John E. Potter, POSTMASTER GENERAL,

                                                       Appellee.

        Appeal from the United States Postal Service Board of Contract Appeals
        in nos. 5101, 5205 and 5268, Administrative Judge Norman O. Menegat

                            ___________________________

                                DECIDED: May 8, 2008
                            ___________________________

Before LOURIE, BRYSON, and GAJARSA, Circuit Judges.

PER CURIAM.

      Appellant Nova Express (“Nova”) appeals a decision by the United States Postal

Service Board of Contract Appeals (“the Board”), upholding the default termination of

Nova’s contract with the United States Postal Service (“Postal Service”). Nova Express,

P.S.B.C.A. Nos. 5101, 5205 and 5268 (P.S.B.C.A. Jun. 11, 2007). For the reasons

stated, we affirm the Board's decision.
                                        BACKGROUND

       On October 30, 2001, the Postal Service awarded Nova contract No. HCR 78640

for transportation of mail between two Postal Service facilities (“the contract”). The

contract expressly provided that Nova must “establish and maintain continuously in

effect” a policy or policies for liability insurance with a minimum Combined Single Limit

(CSL) of $750,000 for any truck used in performance of the contract. The contract

further required that Nova furnish the contracting officer with proof that it had the

requisite insurance, including copies of the applicable policy or policies. The contract’s

termination clause provided that the Postal Service could terminate the contract for

default upon Nova’s failure to perform any provision of the contract, including “if the

supplier fails to establish and maintain continuously in effect insurance as required by

this contract, or fails to provide proof of insurance . . . as required by the contracting

officer.” Under the contract, the Postal Service’s right to terminate the contract for such

default could be exercised only if the Postal Service notified Nova of the specific failure

and provided three days to cure the defect.

       Nova obtained insurance for the truck used in performing the contract from

Fireman’s Fund County Mutual (“Fireman’s Fund”) in the required amount of $750,000

CSL for the term from September 3, 2002 through September 3, 2003. It financed the

insurance through Pronote, Inc. (“Pronote”), an insurance financing company, under an

arrangement in which Nova made a $3,404 downpayment to Fireman’s Fund, and

Pronote paid the balance of the over $11,000 annual premium. Under the financing

agreement, Nova paid monthly installments to Pronote over the term of the policy, and

Pronote was authorized to direct Fireman’s Fund to cancel the policy if Nova failed to

2008-1033                                     2
make the required payments. The Board found that Pronote asked Fireman’s Fund to

cancel the insurance and Fireman’s Fund did so, effective April 7, 2003. Nova did not

notify the Postal Service that the insurance contract had been canceled.

       The contracting officer’s staff noticed in September 2003 that Nova’s insurance

policy had expired according to its original term. The Postal Service attempted to

contact Nova on multiple occasions regarding updating its insurance information, but

Nova failed to respond. The Postal Service then contacted Fireman’s Fund directly. The

Fireman’s Fund insurance agent advised the Postal Service that Nova’s policy had been

canceled in April 2003.

       By letter dated September 19, 2003, the contracting officer notified Nova that its

review indicated that Nova’s insurance had expired, and that as a result of this as well

as unsatisfactory service, Nova was temporarily suspended from performing the

contract, pending investigation of the allegations. As part of the investigation, the letter

asked Nova to provide the Postal Service copies of insurance policies, documenting

proof of insurance without any lapse of coverage after September 2002 to the present.

       By letter dated September 23, 2003, the contracting officer again notified Nova

that under the contract Nova was required to establish and continuously maintain

insurance coverage on all vehicles used in performing the contract. The letter advised

Nova that it must furnish proof of continuous coverage by September 26, 2003 or its

rights to perform under the contract would be terminated for default.

       In response to the letters, Nova submitted to the contracting officer copies of its

Fireman’s Fund policy purporting to cover the period September 3, 2002 to September

2008-1033                                    3
3, 2003, and copies of various truck rental agreements in which some insurance or

damage waivers had been purchased for the rented vehicle.

         On September 30, 2003, the contracting officer issued a final decision

terminating Nova’s contract for default and withholding payment for the pay period

leading up to the termination. On September 3, 2004, the contracting officer denied

Nova’s claims for damages relating to the allegedly improper termination. And on

January 31, 2005, the contracting officer issued a final decision claiming $2,706.20 in

excess reprocurement costs resulting from the termination.

         Nova appealed all three determinations to the Board.        The Board affirmed,

concluding that Nova had knowingly breached its contract obligations. The Board found

that Nova’s liability insurance policy with Fireman’s Fund was cancelled effective April 7,

2003 and that Nova had not shown that it had liability insurance in the amount required

by the contract at any time after that date. The Board also rejected Nova’s contention

that the Postal Service acted in bad faith and found that the evidence provided by the

Postal Service was sufficient to establish Nova’s liability for $2,706.20 in reprocurement

costs.

         We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(10).

                                          DISCUSSION

         The express terms of the contract allow for termination for default upon three

days notice for failure to continuously maintain the required insurance. Whether or not

Nova continuously maintained the required insurance and whether the Postal Service

provided Nova with the requisite three days notice are questions of fact.             See

McDonnell Douglas Corp. v. United States, 323 F.3d 1006, 1014 (Fed. Cir. 2003) (“In

2008-1033                                    4
determining whether a default termination was justified, a court must review the

evidence and circumstances surrounding the termination, and that assessment involves

a consideration of factual and evidentiary issues.”). This Court cannot set aside the

Board’s factual determinations unless they are “fraudulent, or arbitrary, or capricious, or

so grossly erroneous as to necessarily imply bad faith, or if such decision is not

supported by substantial evidence.” 41 U.S.C. § 609(b); see also West Coast Gen.

Corp. v. Dalton, 39 F.3d 312, 314 (Fed. Cir. 1994).

       We find no basis for overturning the Board’s findings. In a thorough opinion, the

Board carefully reviewed the testimony and exhibits before it. 1 Substantial evidence

supports the Board’s determination that Nova’s Fireman’s Fund insurance policy had

been canceled effective April 7, 2003, and that none of the truck rental agreements

provided the required level of insurance. As the Board found, the cancellation of the

Fireman’s Fund policy was documented in a letter from Pronote, and the truck rental

agreements Nova provided either showed that no liability insurance was purchased or

that the liability insurance provided was much less than the required $750,000.

       Substantial evidence also supports the Board’s determination that the Postal

Service provided Nova with adequate notice of its failure to meet the terms of the

       1
              Nova argues that the Board failed to discuss various pieces of evidence in
its opinion. Nova has not established the relevance of any of the evidence it believes
was wrongfully neglected, however, and we conclude that there was nothing arbitrary
and capricious in the Board’s consideration of the evidence. We also find no abuse of
discretion in the Board’s acceptance into evidence of Postal Service Exhibits which
Nova argues were first provided to it at trial. See Johnson Mgmt. Group CFC, Inc. v.
Martinez, 308 F.3d 1245, 1252 (Fed. Cir. 2002) (“[A] discovery or evidentiary ruling of
the Board will not be overturned unless ‘an abuse of discretion is clear and is harmful.’”)
(quoting Curtin v. Office of Pers. Mgmt., 846 F.2d 1373, 1378 (Fed. Cir. 1988))). The
Board was entitled to find credible the government’s representation that the Exhibits in
question had been repeatedly sent to Nova prior to trial.

2008-1033                                   5
contract and gave Nova three days to cure this breach prior to terminating the contract.

Nova’s reliance on the September 19, 2003 letter to show that no notice had been given

is misplaced. The September 19, 2003 letter did not terminate the contract but merely

suspended Nova’s performance of the contract pending investigation. As the Board

found, it was the September 23, 2003 letter which provided Nova with notification that

the contract would terminate if Nova did not furnish proof of continuous insurance, and

this letter gave Nova three days to furnish such proof. The contract was only terminated

on September 30, after this three day period had expired.

       There is also no reversible error in the Board’s determination that the Postal

Service did not act with bad faith in terminating the contract. See Am-Pro Protective

Agency, Inc. v. United States, 281 F.3d 1234, 1241 (Fed. Cir. 2002) (holding that clear

and convincing evidence is required to overcome the presumption that the government

acted in good faith). The Board found that Nova’s allegations of bad faith were not

supported in the record, and it concluded that witnesses for the Postal Service denying

the allegations were credible. Nova has provided no convincing basis for overturning

these findings. See Charles G. Williams Constr., Inc. v. White, 326 F.3d 1376, 1381

(Fed. Cir. 2003) (“Board credibility determinations . . . are ‘virtually unassailable.’”).

        Accordingly, we affirm the Board’s finding that the Postal Service’s termination of

the contract was justified.

       We also affirm the Board’s determination that the Postal Service was entitled to

recover its reprocurement costs. Nova argues here, as it did before the Board, that the

government should have produced the “bid sheets” reflecting the various emergency

service offers.    The Board found that despite the absence of the bid sheets the

2008-1033                                      6
testimony of the Postal Service’s contract specialist was “credible and sufficient to

establish that the Postal Service acted properly and made reasonable efforts to

minimize the reprocurement costs.” We find no basis to disturb the Board’s finding.

      The judgment of the Board is affirmed.

      Costs to Appellee.

2008-1033                                  7