Court Opinion

ID: 2756130
Source: CourtListenerOpinion
Date Created: 2014-11-28 15:00:05.050334+00
Date Added: 2024-06-11T11:26:50.634436
License: Public Domain

ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeals of --                                     )
                                                  )
Agility Defense & Government Services, Inc. )         ASBCA Nos. 58870, 59261
 (a/k/a Agility DGS Holdings, Inc.)         )
                                                  )
Under Contract No. SPM7LX-09-D-9004               )

APPEARANCES FOR THE APPELLANT:                        Gary L. Rigney, Esq.
                                                      Jon D. Levin, Esq.
                                                      W. Brad English, Esq.
                                                       Maynard, Cooper & Gale, P.C.
                                                       Huntsville, AL

APPEARANCES FOR THE GOVERNMENT:                       Daniel K. Poling, Esq.
                                                       DLA Chief Trial Attorney
                                                      Matthew 0. Geary, Esq.
                                                       Trial Attorney
                                                       DLA Land and Maritime
                                                       Columbus, OH

                                                      Gregory T. Allen, Esq.
                                                       Trial Attorney
                                                       Defense Contract Management Agency
                                                       Chantilly, VA

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

        Agility Defense & Government Services, Inc., (a/k/a Agility DGS Holdings,
Inc.) (Agility) appeals the termination contracting officer's (TCO's) settlement
determination related to the termination for convenience of contract line item numbers
(CLINs) 0001 through 0006 of its contract (contract termination) with the Defense
Logistics Agency (DLA) (ASBCA No. 58870). In addition, Agility seeks $297,794.26
resulting from DLA's constructive termination for convenience of CLIN 0002 prior to
the contract termination (pre-termination claim) (ASBCA No. 59261). DLA moves to
dismiss the pre-termination appeal (ASBCA No. 59261) without 1 prejudice alleging that

1
    The government's motion requests this appeal be dismissed both with and without
         prejudice (gov't mot. at 1, 6, 7). However, the government clarified this issue
         during oral arguments stating that it was requesting dismissal without prejudice
         and appellant could file its claim with the TCO (tr. 12).
the TCO's act in terminating CLIN 0002 as part of the contract termination rendered
this appeal moot, thereby depriving the Board of subject matter jurisdiction. The parties
jointly requested oral arguments on the motion, which were held on 12 August 2014.

        STATEMENT OF FACTS (SOF) FOR PURPOSES OF THE MOTION

         1. The DLA, Land and Maritime, Columbus, Ohio, (DLA) awarded an
indefinite-quantity contract, No. SPM7LX-09-D-9004, to Agility on 12 December
2008. The primary requirements under the contract were to provide industrial
hardware supply support directly to the maintenance operations at Tobyhanna Army
Depot, Pennsylvania, by maintaining stock in designated bin locations under a
fixed-price CLIN (CLIN 0001) and to acquire, stock and deliver industrial hardware
supplies to worldwide customers at various destinations in accordance with task orders
issued under CLIN 0002. (R4, tab 1 at G-1, -2) Although the contract contained
seven CLINs, Agility complaint only "relates to the supply of Worldwide Demand
Items to be provided under CLIN 0002 [R4, tab 1 at G-14, -58] of the contract for
which [Agility] was to receive a fixed price per item ... for all costs (management,
infrastructure, item, and distribution) associated with the delivery of supplies" (comp I.
ii 5 (citing Federal Acquisition Regulation (FAR) 52.216-18)) (emphasis added). 2

       2. The contract included the FAR 52.212-4(1), CONTRACT TERMS AND
CONDITIONS-COMMERCIAL ITEMS (FEB 2007) clause, which states, in pertinent part, in
the event of a government termination for convenience the contractor may recover "a
percentage of the contract price reflecting the percentage of the work performed prior to
the notice of termination, plus reasonable charges the Contractor can demonstrate ... have
resulted from the termination" (R4, tab 1 at G-9).

        3. Agility began work under CLIN 0002 in September 2009. In a
19 November 2009 memorandum decision, DLA announced that it had suspended
The Public Warehousing Company, pursuant to FAR Subpart 9.4. 3 DLA extended
the suspension to include The Public Warehousing Company's affiliates, including
Agility. 4 Shortly thereafter, in light of the suspension, DLA notified Agility that all
work under CLIN 0002 was suspended. Agility, however, continued to perform work
under other CLINs, which were not affected by the suspension. (Compl. ii 7)
Notwithstanding the suspension of CLIN 0002 activities, Agility maintained the
ability to perform in the event that the suspension was lifted (comp I. ii 8).

2
  All citations to the complaint reference appellant's Amended and Restated
        Complaint, filed with the Board and dated 15 May 2014 (Bd. corr.).
3
  See FAR 9.407-2(a) (providing for contractor's suspension where there exists
        adequate evidence of improprieties).
4
  See FAR 9 .407-1 (c) (providing that suspension may extend to contractor's affiliates).

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       4. In June, 2011, Agility requested that DLA terminate CLIN 0002 for
convenience in order that Agility would not incur any further expenses in maintaining
the required inventory and the capability to perform under CLIN 0002. DLA
refused to terminate CLIN 0002 for convenience until a succession plan was in place.
(Compl. ~ 9)

       5. On 23 November 2011, Agility filed its pre-termination claim asserting that
CLIN 0002 had been constructively terminated as of 19 November 2009 and that the
government had breached its implied covenant of good faith and fair dealing by
continuing an indefinite suspension of CLIN 0002 which necessitated that Agility keep
certain amounts of inventory on hand in order to maintain the capability to perform, as
required by the contract. The pre-termination claim sought reimbursement for the
value of the inventory which Agility continued to retain under the suspension in an
amount of $586,029.76. (Compl. ~ 11, ex. A)

       6. On 20 March 2012, Thomas J. Maul, contracting officer (CO), issued a
final decision denying Agility's pre-termination claim in its entirety (compl. ~ 12, ex. B).

      7. On 19 June 2012, Agility received a notice that its contract would be
terminated for the government's convenience on or about 27 July 2012. The termination
was subsequently issued by contract Modification No. POOO 12 (Mod. 12), dated 31 July
2012. Pertinent to this motion, Mod. 12 terminated contract CLINs 0001-0006 for
convenience pursuant to FAR 52.212-4(1). (R4, tabs 4, 5)

        8. As directed by the TCO, Agility submitted a proposal for a termination
settlement which, inter alia, addressed a portion of the inventory which had been
maintained under CLIN 0002 (compl. ~ 14). The termination settlement proposal
claimed a total of $509,937.79 for inventory buyback under CLINs 0001 & 0002, and
DLA agreed to and subsequently paid Agility said amount (settlement proposal
payment) (compl. ~ 15, ex. B). However, Agility's complaint alleges only $288,235.50
of the settlement proposal payment is related to the pre-termination claim for costs
under CLIN 0002 - reducing the pre-termination claim at issue to $297, 794.26 (compl.
~ 15).

       9. Agility filed a complaint on 21 March 2013 with the United States Court of
Federal Claims, Case No. 13-204-C. In its complaint, Agility challenged the propriety
of the CO's decision dated 20 March 2012. (Compl. ~ 16)

       10. On 17 June 2013, the TCO issued a final decision on Agility's termination
settlement proposal submitted under Contract No. SPM7LX-09-D-9004 (R4, tab 30

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at G-680). Agility filed a notice of appeal with the Board and the appeal was docketed
as ASBCA No. 58870 on 12 September 2013.

       11. Pursuant to 41 U.S.C. § 7107(d), the United States Court of Federal Claims,
by Order dated 19 February 2014, transferred Case No. 13-204-C (pre-termination
claim) to the Board and on 15 April 2014, the matter was docketed as ASBCA
No. 59261.

        12. On 10 July 2014, DLA filed a motion to dismiss the pre-termination
claim (ASBCA No. 59261) arguing that the Board lacked subject matter jurisdiction
over the dispute because the contract termination rendered this dispute moot. The
parties requested oral arguments on the motion, which were held on 12 Au_rust 2014.
Subsequently, a hearing on both appeals was held on 8-9 September 2014.

                                        DECISION

Contentions of the Parties

       The government's motion asserts two basic arguments. First, the government
argues that the contract termination rendered the pre-termination appeal moot because
the remedies granted appellant by the contract termination are identical to those sought
by the pre-termination appeal - the termination of CLIN 0002 for convenience -
thereby depriving the Board of jurisdiction to hear this appeal (gov't mot. at 3-5).
Second, the government argues the contract termination (absent a finding of bad faith
or clear abuse of discretion) extinguished the issue of whether there was a prior
termination, thereby granting appellant the same remedies as under the contract
termination. As a result, appellant's pre-termination claim became subject to the
termination for convenience clause, FAR 52.212-4(1), depriving the Board of
jurisdiction over the appeal because appellant failed to present the pre-termination
claim in its entirety to the TCO and that portion of the claim ($297, 794.26) was not
addressed under the TCO's final decision (gov't mot. at 4-6).

       Appellant responds by arguing it continues to have an interest in the outcome of
the appeal because it has not received all the money it is due, it does allege bad faith
and, even if bad faith was not alleged, the remedies afforded a contractor under a
termination for convenience are not the same as when a contract is constructively

5
    Due to the timing of the motion, the parties agreed to proceed with the hearing even
        with the motion pending.

                                             4
terminated. Addressing the difference in remedies, appellant argues:

              In this case, the Contract was actually terminated for
              convenience while the Pre-Termination Claim was
              pending. The actual termination of the Contract on
              July 31, 2012 does not necessarily provide the same
              remedies as a constructive termination effective
              November 19, 2009. A constructive termination for
              convenience retroactively invokes the termination for
              convenience clause and allows a contractor to recover as if
              the government had actually invoked the clause on the date
              of the government's invalid action. Praecomm, Inc. v.
              United States, 78 Fed. Cl. 5, 11 (2007). The key difference
              between the remedies from a constructive termination for
              convenience and a subsequent actual termination for
              convenience is the effective date of the termination.

                      Under the termination for convenience clause, the
              contractor may recover "a percentage of the contract price
              reflecting the percentage of work performed prior to the
              notice of termination, plus reasonable charges the
              Contractor can demonstrate ... have resulted from the
              termination." FAR 52.212-4(1). The charges that
              reasonably result from a termination on November 19,
              2009 and a notice of termination on June 19, 2012 can
              differ substantially. For example, expenses incurred
              prior to the notice of termination on June 19, 2012 may
              not be considered a result of the termination. However,
              if the Contract was constructively terminated as of
              November 19, 2009, the expenses incurred after said date
              certainly would be considered a result of the termination.
              Therefore, a subsequent actual termination for convenience
              may not provide the contractor the same relief as a
              constructive termination for convenience regardless of bad
              faith.

(App. resp. at 8-9)

       The merits of the motion

       A dispute only becomes moot when all "relief sought has been granted or ... the
questions originally in controversy between the parties are no longer at issue."

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                                                                                         I
                                                                                         J
 Chapman Law Firm Co. v. Greenleaf Construction Co., 490 F.3d 934, 939-40 (Fed.
 Cir. 2007); Lasmer Industries, Inc., ASBCA Nos. 56946, 56966, 11-1BCA~34,671
 at 170,801 {appeal dismissed with prejudice as moot where contracting officer granted
 all relief requested extinguishing the dispute between the parties). In deciding a
 motion to dismiss for lack of subject matter jurisdiction, we must "accept as true, and
 construe in a light most favorable to the non-movant, only undisputed factual
 allegations." Linc Government Services, LLC, ASBCA No. 58561 et al., 14-1 BCA
 ~ 35,473 at 173,933. None of the facts relevant to this motion are in dispute. 6 The
 proponent of the Board's jurisdiction bears the burden of establishing jurisdiction once
 challenged. Raytheon Missile Systems, ASBCA No. 58011, 13 BCA ~ 35,241
 at 173,016.

Did Termination ofCLIN 0002 Grant Appellant the Relief Sought and Extinguish the
Dispute?

       We disagree with the government's conclusion that the relief granted under the
pre-termination claim and the contract termination would be the same; appellant still
has cognizable interests in the outcome of this appeal because contract termination of
CLIN 0002 does not necessarily provide appellant the same relief as under the
pre-termination claim. As noted by appellant, the timing of the termination order may
have a significant impact on the measure of potential recovery under the terms of the
commercial termination clause, FAR 52.212-4(1 ), and could potentially differ under
each procedure (app. resp. at 8-9; tr. 18). This is true whether or not bad faith is
alleged. Therefore, termination of CLIN 0002 did not grant appellant the full relief it
sought or extinguish the dispute so as to render the appeal moot.

          We also disagree with the government's argument that we lack jurisdiction over
  the pre-termination claim because it ceased to be an independent claim when
  CLIN 0002 was terminated and appellant has not submitted its settlement claim to the
. TCO as required. The pre-termination claim and the CO's denial of the claim predated
  the contract termination (SOF ~~ 5-6). Independent claims are not necessarily merged
  into the termination of the same contract under which the claim arose and may be
  appealed separately from the termination for convenience appeal. James M Ellett
  Construction Co. v. United States, 93 F.3d 1537, 1548 (Fed. Cir. 1996); RW
  Electronics Corp., ASBCA No. 46592, 96-2 BCA ~ 28,540.

6
    The government concedes the remedies available under a constructive termination
        and termination of CLIN 0002 would not be identical if there were a finding of
        bad faith but argues appellant has not alleged bad faith in its pleadings (gov't
        mot. at 5, 6 n.2). Appellant disputes this fact, noting it alleges bad faith in its
        claim (SOF ~ 5), and its complaint (compl. ~ 11) (app. resp. at 7). However, it
        is not necessary for us to address this disputed fact to decide his motion.

                                              6
                                    CONCLUSION

        Construing the undisputed facts in a light most favorable to appellant, we conclude
that the government's termination of CLIN 0002 for convenience did not grant appellant
all the relief it sought nor resolve the dispute at issue under its pre-termination appeal so
as to render this appeal moot. The government's motion to dismiss is denied.

       Dated: 14 November 2014

                                                     minist ative Judge
                                                  Armed Services Board
                                                  of Contract Appeals

I concur                                          I concur

~~4
Administrative Judge
                                                  RICHARD SHACKLEFORD
                                                  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. 58870, 59261, Appeals of
Agility Defense & Government Services, Inc. (a/k/a Agility DGS Holdings, Inc.),
rendered in conformance with the Board's Charter.

      Dated:

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

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