Court Opinion

ID: 6497658
Source: CourtListenerOpinion
Date Created: 2022-07-05 13:00:31.361556+00
Date Added: 2024-06-11T08:51:19.149065
License: Public Domain

Case: 21-2272   Document: 30     Page: 1   Filed: 07/05/2022

        NOTE: This disposition is nonprecedential.

   United States Court of Appeals
       for the Federal Circuit
                 ______________________

                U.S. AEROTEAM, INC.,
                   Plaintiff-Appellant

                            v.

                   UNITED STATES,
                   Defendant-Appellee
                 ______________________

                       2021-2272
                 ______________________

    Appeal from the United States Court of Federal Claims
 in No. 1:18-cv-01096-MBH, Senior Judge Marian Blank
 Horn.
                  ______________________

                  Decided: July 5, 2022
                 ______________________

     MILTON C. JOHNS, Executive Law Partners, PLLC,
 Fairfax, VA, argued for plaintiff-appellant.

     IGOR HELMAN, Commercial Litigation Branch, Civil Di-
 vision, United States Department of Justice, Washington,
 DC, argued for defendant-appellee. Also represented by
 BRIAN M. BOYNTON, LISA LEFANTE DONAHUE, PATRICIA M.
 MCCARTHY.
                  ______________________
Case: 21-2272     Document: 30     Page: 2    Filed: 07/05/2022

 2                                    U.S. AEROTEAM, INC.   v. US

     Before LOURIE, PROST, and TARANTO, Circuit Judges.
 LOURIE, Circuit Judge.
     U.S. Aeroteam, Inc. (“Aeroteam”) contracted with the
 United States Air Force to build ground support trailers.
 After Aeroteam incurred additional costs building the trail-
 ers, it requested compensation from the Air Force. The Air
 Force denied its request. Aeroteam filed a complaint at the
 United States Court of Federal Claims (“the Claims
 Court”). The Claims Court entered judgment in favor of
 the United States. U.S. Aeroteam, Inc. v. United States,
 No. 1:18-cv-01096-MBH (Fed. Cl. 2019), J.A. 3–9. We af-
 firm the court’s judgment for the reasons explained below.
                         BACKGROUND
     Aeroteam is a contractor that specializes in building
 components for the aerospace industry. In 2009, the Air
 Force awarded Aeroteam a contract to produce ground sup-
 port trailers. J.A. 1709–10. The Air Force uses those trail-
 ers to transport aircraft engines. J.A. 1709.
     In 2011, Aeroteam began having difficulties obtaining
 a key component of the trailers—the running-gear subas-
 sembly. J.A. 1712. The running gear is “essentially the
 drive train” for the trailer, “allow[ing] [it] to roll, brake,
 [and] steer.” J.A. 1710. To obtain the running gears, Aero-
 team relied on PDI Ground Support Systems, an approved
 vendor under the contract. 1 J.A. 1711–12. PDI initially
 charged Aeroteam $20,300 per unit. J.A. 1711. After fac-
 ing financial difficulties, however, PDI raised its price.
 J.A. 7 (845:1–6). In response, Aeroteam decided to manu-
 facture the running gears itself. According to Aeroteam, it
 could produce them “as well or better than PDI.”

     1   Under the terms of the contract, Aeroteam could
 procure the running gears only from certain approved ven-
 dors, including PDI. J.A. 1710–11.
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 U.S. AEROTEAM, INC.   v. US                                   3

 J.A. 1713–14; J.A. 1861 (342:3–12); J.A. 2125. Aeroteam
 was also concerned that PDI could not continue to supply
 it with the running gears in light of its financial situation. 2
 Appellant’s Br. 8. Subsequently, Aeroteam formally asked
 the Air Force if it could assume responsibility for manufac-
 turing the running gears. J.A. 1714. Its request read, in
 relevant part, as follows:
     US Aeroteam proposes to manufacture the entire
     running gear and brake system for TT90-F-507
     Trailers Sernos 0020-0041 because PDI has re-
     fused to complete the contract as awarded.
 J.A. 2125 (capitalization modified). The contracting officer
 approved Aeroteam’s request, stating that the manufactur-
 ing change was “acceptable.” J.A. 1715–16. On September
 6, 2012, the Air Force awarded Aeroteam a second contract
 to produce additional trailers. J.A. 1716.
     Shortly after Aeroteam began manufacturing the run-
 ning gears for the trailers, it discovered that its costs were
 higher than it had expected. J.A. 7. As a result, Aeroteam
 sought to recoup those costs and filed a request for equita-
 ble adjustment in the amount of $1,385,912 for the first
 contract and $4,022,273 for the second contract.
 J.A. 29–30; Contract No. FA8526-09-C-0007 and Contract
 No. FA8526-12-C-0039. As relevant here, both of Aero-
 team’s contracts were “firm-fixed-price,” meaning that they
 “place[d]” upon Aeroteam the “maximum risk and full re-
 sponsibility for all costs and resulting profit or loss.” Fed-
 eral Acquisition Regulation § 16.202-1; J.A. 1710, 1716.
    The contracting officer denied Aeroteam’s request for
 equitable adjustment. J.A. 1717. Aeroteam then filed a
 complaint at the Claims Court, alleging three grounds for

     2   The government disputes Aeroteam’s assertion
 that PDI could no longer produce the running gears. We
 further address that argument below.
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 4                                    U.S. AEROTEAM, INC.   v. US

 recovery: (1) constructive change, i.e., the Air Force or-
 dered Aeroteam, expressly or impliedly, to perform work
 beyond the contract requirements; (2) cardinal change, i.e.,
 the Air Force effected an alteration in the work so drastic
 that it effectively required Aeroteam to perform duties ma-
 terially different from those it originally bargained for; and
 (3) commercial impracticability, i.e., because of unforeseen
 events, Aeroteam could perform the contract only at an ex-
 cessive and unreasonable cost or performance would be
 commercially senseless.
     The Claims Court denied Aeroteam’s claims, issuing its
 decision from the bench without a subsequent written opin-
 ion. With respect to the constructive and cardinal change
 claims, the court held that Aeroteam had failed to prove
 that the Air Force ordered it to manufacture the running
 gears. 3 Rather, according to the court, Aeroteam inde-
 pendently chose to do so. J.A. 7 (846:11–13); J.A. 8
 (849:1–2). With respect to the commercial impracticability
 claim, the court found that Aeroteam could have continued
 to buy the running gears from PDI, albeit at a higher price.
 J.A. 5 (838:14–16). The court also pointed out that, be-
 cause Aeroteam had entered into a fixed-price-contract, it
 assumed the risk that the price of the running gears would
 change. J.A. 6 (840:21–841:1); J.A. 7 (846:13–15).
     After concluding that Aeroteam failed to prove its
 claims for recovery, the court entered judgment in favor of
 the government. J.A. 1. Aeroteam appealed to this court.
 We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(3).
                         DISCUSSION
    This court reviews legal determinations of the Claims
 Court de novo and its findings of fact for clear error. Ind.
 Mich. Power Co. v. United States, 422 F.3d 1369, 1373 (Fed.

     3  The Claims Court discussed cardinal change in
 conjunction with constructive change.
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 U.S. AEROTEAM, INC.   v. US                               5

 Cir. 2005) (citing Glendale Fed. Bank, FSB v. United
 States, 239 F.3d 1374, 1379 (Fed. Cir. 2001)). “A finding is
 ‘clearly erroneous’ when although there is evidence to sup-
 port it, the reviewing court on the entire evidence is left
 with the definite and firm conviction that a mistake has
 been committed.” United States v. U.S. Gypsum Co., 333
 U.S. 364, 395 (1948).
     Aeroteam argues that the Claims Court erred in deny-
 ing its claims for (1) constructive change, (2) cardinal
 change, and (3) commercial impracticability. We address
 each argument in turn.
                               I
     We turn first to Aeroteam’s argument regarding its
 constructive change claim. To demonstrate a constructive
 change, a contractor must show “(1) that it performed work
 beyond the contract requirements, and (2) that the addi-
 tional work was ordered, expressly or impliedly, by the gov-
 ernment.” Bell/Heery v. United States, 739 F.3d 1324, 1335
 (Fed. Cir. 2014) (emphasis added) (citing Redland Co. v.
 United States, 97 Fed. Cl. 736, 755–56 (2011)). The parties’
 dispute centers on the second element of constructive
 change.
     Aeroteam argues that the Claims Court erred in deny-
 ing its constructive change claim. According to Aeroteam,
 it did not choose to manufacture the running gears. Ra-
 ther, the Air Force ordered it to make that change. The
 government responds that Aeroteam independently chose
 to manufacture the running gears, with no express or im-
 plied order from the Air Force.
     We agree with the government that the Claims Court
 did not err in denying Aeroteam’s constructive change
 claim. As the Claims Court held, Aeroteam failed to prove
 that the Air Force ordered it to manufacture the running
 gears. J.A. 7 (846:11–15); J.A. 8 (849:1–8). On the con-
 trary, that was “a choice that Aeroteam made.” J.A. 7
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 6                                   U.S. AEROTEAM, INC.   v. US

 (846:11–13). Specifically, after learning of PDI’s financial
 difficulties, Aeroteam coordinated a plan to manufacture
 the running gears. Aeroteam did so because it was “confi-
 dent that [it could] produce” the running gears “as well or
 better than PDI”—not because it was ordered to by the Air
 Force. J.A. 1713–14. Indeed, Aeroteam itself “propose[d]”
 to the Air Force that it “manufacture the entire running
 gear.” J.A. 2125 (emphasis added and capitalization mod-
 ified). Moreover, Aeroteam acknowledged that it could not
 “do[] anything” with respect to manufacturing until it
 sought the Air Force’s approval. J.A. 1714–15. Accord-
 ingly, in view of the record before us, we see no clear error
 in the court’s determination.
     Aeroteam makes several additional arguments, all un-
 persuasive. First, Aeroteam emphasizes that the Air Force
 approved its manufacturing request. According to Aero-
 team, because of that approval, the Air Force effectively di-
 rected it to manufacture the running gears. We disagree.
 Mere approval, standing alone, is insufficient to prove con-
 structive change. Rather, there must be an “order[],” either
 “express[] or implied[].” Bell/Heery, 739 F.3d at 1335 (cit-
 ing Redland, 97 Fed. Cl. at 755–56). Accordingly, Aero-
 team’s argument is unpersuasive.
     Second, Aeroteam argues that the Claims Court “ex-
 pand[ed] the requirements” necessary to prove a claim for
 constructive change. Appellant’s Br. 21. Specifically, Aero-
 team points to portions of the court’s decision suggesting it
 was required to prove that the government authorized a
 “change in contract price.” See Appellant’s Br. 21–22;
 J.A. 6 (841:17–22) (“[T]he government . . . [did not take]
 that next step of authorizing or directing a change in the
 contract price.”) (emphasis added); J.A. 8 (849:9–11) (“The
 drawings, the expectation of whether the plaintiff could
 produce it in-house appropriately, that was approved, but
 the price change was not.”) (emphasis added). According to
 Aeroteam, because of the court’s misstatements, we must
 reverse its decision.
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 U.S. AEROTEAM, INC.   v. US                                  7

      We disagree with Aeroteam. Certainly, to prove a
 claim for constructive change, a contractor need not show
 that the government authorized a change to the contract
 price. Rather, it need only show that the government or-
 dered it (expressly or impliedly) to perform work beyond
 the contract requirements. See Bell/Heery, 739 F.3d at
 1335 (citing Redland, 97 Fed. Cl. at 755–56). To the extent
 the Claims Court suggested otherwise, that was erroneous.
 Regardless, any such error was harmless. As explained
 above, the court carefully evaluated the evidence and de-
 termined that Aeroteam chose to manufacture the running
 gears itself, with no express or implied order from the Air
 Force. See J.A. 4 (833:23–834:3) (“[T]o demonstrate a con-
 structive change, [a] plaintiff has to show . . . that the ad-
 ditional work was ordered expressly or impliedly by the
 government.”); J.A. 7 (846:11–13) (“The termination that
 [Aeroteam] exercised toward[] PDI was, again, a choice
 that [it] made.”) (emphasis added); J.A. 8 (849:8) (Aeroteam
 “offered to pull [the manufacturing] in-house.”) (emphasis
 added). Thus, the court’s possible suggestion of an addi-
 tional requirement for constructive change did not affect
 the outcome of the case. See Valles v. Dep’t of State,
 17 F.4th 149, 152 (Fed. Cir. 2021) (“As an appellate court,
 we are obligated to apply the rule of harmless error, exam-
 ining the record ‘without regard to errors or defects which
 do not affect the substantial rights of the parties.’” (quoting
 28 U.S.C. § 2111)).
     Accordingly, we affirm the Claims Court’s determina-
 tion that the Air Force was not liable for constructively
 changing the contract.
                               II
     We next turn to Aeroteam’s argument regarding its
 cardinal change claim. To demonstrate a cardinal change,
 a contractor must show that the “government effect[ed] an
 alteration in the work” that “effectively require[d] the con-
 tractor to perform duties materially different from those
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 8                                    U.S. AEROTEAM, INC.   v. US

 originally bargained for.” Krygoski Constr. Co. v. United
 States, 94 F.3d 1537, 1543 (Fed. Cir. 1996) (emphasis
 added) (quoting AT & T Commc’ns, Inc. v. WilTel, Inc., 1
 F.3d 1201, 1205 (Fed. Cir. 1993)). “By definition . . . a car-
 dinal change is so profound that it is not redressable under
 the contract, and thus renders the government in breach.”
 Id.
      Aeroteam argues that the Air Force was liable for mak-
 ing a cardinal change to the contract. In support of its ar-
 gument, Aeroteam again asserts that the Air Force ordered
 it to manufacture the running gears in-house. The govern-
 ment responds that Aeroteam’s cardinal change claim fails
 for the same reason that its constructive change claim fails:
 Aeroteam chose to manufacture the running gears. The Air
 Force did not order it to do so.
     We agree with the government. As explained above,
 the evidence showed that Aeroteam chose to manufacture
 the running gears; the Air Force did not “effect an altera-
 tion” in Aeroteam’s work. See J.A. 7 (846:11–13); Krygoski,
 94 F.3d at 1543 (emphasis added) (quoting AT & T, 1 F.3d
 at 1205). 4 Accordingly, we affirm the Claims Court’s deter-
 mination that the Air Force was not liable for making a
 cardinal change to the contract.
                              III
     Finally, we turn to Aeroteam’s argument regarding its
 commercial impracticability claim. To prove commercial
 impracticability, a contractor must show that “because of
 unforeseen events, [the contract] can be performed only at

     4    Because we determine that the Air Force did not
 “effect an alteration” in Aeroteam’s work, we need not reach
 the question whether any alteration was “materially differ-
 ent from those [that Aeroteam] originally bargained for.”
 Krygoski, 94 F.3d at 1543 (emphasis added) (quoting
 AT & T, 1 F.3d at 1205).
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 U.S. AEROTEAM, INC.   v. US                                 9

 an excessive and unreasonable cost” or “all means of per-
 formance are commercially senseless.” Raytheon Co. v.
 White, 305 F.3d 1354, 1367 (Fed. Cir. 2002) (citations and
 internal quotation marks omitted).
      Aeroteam argues that it would have been commercially
 impracticable for it to perform the contract. According to
 Aeroteam, PDI could “no longer produce” the running gears
 in light of its financial difficulties. Appellant’s Br. 8. In
 support of its argument, Aeroteam emphasizes that PDI’s
 products were “plagu[ed]” with quality control issues, mak-
 ing it doubtful that it could complete the manufacturing
 order. Id. The government responds that PDI could have
 continued to manufacture the running gears. Specifically,
 the government contends that PDI did not decline to man-
 ufacture the running gears after facing financial difficul-
 ties. Rather, it merely raised the price per unit. The
 government adds that Aeroteam could have paid that
 higher price but chose not to for its own financial reasons.
      We agree with the government. After considering the
 evidence, the Claims Court found that Aeroteam could
 have continued to buy the running gears from PDI. J.A. 5
 (838:14–16) (“[T]he evidence does not support that at the
 higher price, PDI would not have continued to supply the
 product.”). The court acknowledged that PDI faced finan-
 cial difficulties. It explained, however, that those difficul-
 ties caused PDI to raise the price of its running gears, not
 to stop producing them altogether. J.A. 7 (845:1–7). The
 court further emphasized that Aeroteam could have bought
 the running gears for the higher price but chose not to do
 so. J.A. 7 (845:8–10). 5 Finally, the court found that Aero-
 team failed to provide evidence “document[ing]” that the

     5   The Claims Court did not make a conclusive find-
 ing regarding the amount that PDI charged Aeroteam after
 facing financial difficulties. PDI charged other parties up
 to $38,000. J.A. 1861 (341:6–20).
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 10                                   U.S. AEROTEAM, INC.   v. US

 higher price was excessive. 6 J.A. 7 (845:14–16). Aeroteam
 points to no clear error in the court’s factual findings. Ra-
 ther, it effectively asks us to reweigh the evidence and hold
 in its favor. We decline to do so.
     Aeroteam further argues that the Claims Court mis-
 stated the law on firm-fixed-price contracts. According to
 Aeroteam, the court “seem[ed] to hold” that a contractor
 entering into a firm-fixed-price contract may not raise a
 claim for commercial impracticability. Appellant’s Br.
 26–27.
      We disagree with Aeroteam’s reading of the court’s de-
 cision. The court did not suggest that Aeroteam was barred
 from raising a commercial impracticability claim. Rather,
 it stated that certain types of changes to Aeroteam’s firm-
 fixed-priced contracts were not necessarily compensable,
 including, for example, an increase in the market price of
 running gears. J.A. 5 (837:1–5) (“A finding of impractica-
 bility excuses a party from performing unless the party has
 assumed the risk of the event.”) (emphasis added). As the
 court explained, that was “part of the risk” that Aeroteam
 assumed in entering a firm-fixed-price contract. See J.A. 5
 (837:23–838:6); J.A. 7 (846:13–15); Seaboard Lumber Co. v.
 United States, 308 F.3d 1283, 1295 (Fed. Cir. 2002) (“The
 normal risk of a fixed price contract is that the market price
 will change.” (quoting N. Ind. Pub. Serv. Co. v. Carbon
 County Coal Co., 799 F.2d 265, 275 (7th Cir. 1986))). Ac-
 cordingly, we affirm the court’s determination that it was
 not impracticable for Aeroteam to perform the contract.

      6  Although the Claims Court initially stated that it
 “guess[ed]” the higher price made PDI an “unavailable
 source,” it immediately qualified that statement by empha-
 sizing that “it was also a matter of choice on the part of
 [Aeroteam] not to pay the higher price.” J.A. 7 (845:8–10)
 (emphasis added).
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 U.S. AEROTEAM, INC.   v. US                             11

     In summary, the Claims Court did not clearly err in
 denying Aeroteam’s claims for constructive change, cardi-
 nal change, or commercial impracticability.
                           CONCLUSION
     We have considered Aeroteam’s remaining arguments
 but find them unpersuasive. For the foregoing reasons, the
 decision of the Claims Court is affirmed.
                           AFFIRMED