Court Opinion

ID: 4199586
Source: CourtListenerOpinion
Date Created: 2017-08-28 21:02:46.645214+00
Date Added: 2024-06-11T07:47:32.329406
License: Public Domain

United States Court of Federal Claims
                                           No. 14-423 C
                                      (Filed August 28, 2017)

____________________________________
E&E ENTERPRISES GLOBAL, INC.,
                                                          Breach of Contract; Termination of
               Plaintiff,                                 Contract for Convenience; Wrongful
                                                          Termination; “Turn-Key”; Motion for
                                                          Partial Summary Judgment
v.

UNITED STATES OF AMERICA,

          Defendant.
_________________________________

       Cyrus E. Phillips, IV, Esquire, Cyrus E. Phillips, IV, Attorney at Law, Williamsburg,
VA, for plaintiff.

      Kelly A. Krystyniak, Esquire, United States Department of Justice, Civil Division,
Washington, DC, for defendant.

                                   OPINION AND ORDER

Hodges, Senior Judge.

        Plaintiff E&E Enterprises Global, Inc., filed a motion for partial summary judgment in
this indefinite-delivery indefinite-quantity contract case on March 27, 2017; defendant filed a
cross motion thereafter.1 We heard oral arguments on the cross motions in Washington, DC, on
August 17, 2017.

        Plaintiff’s attorney argued in part that defendant entered into this contract or terminated it
for convenience in bad faith. Termination for convenience in bad faith is not commonly
established in this court, as the vendor must show that the Government signed the contract
without any intention of carrying out its responsibilities. See Torncello v. United States, 681 F.2d
756, 772 (Ct. Cl. 1982). However, we were not able to determine during oral arguments that the

1
 According to exchanges of emails between counsel for defendant and plaintiff, the motions for
summary judgment are termed “partial” only because certain un-audited costs are not included at
this stage.
agency clearly did intend to pursue this particular solution for its needs. Moreover, the Record
shows that defendant had gained knowledge from earlier contract negotiations with another
vendor that would have assisted plaintiff in its efforts to meet the terms of its contract.

        A careful review of the record in this case has not made it possible to rule for either party
at this stage of the dispute. For that reason, we must deny the cross motions for summary
judgment and proceed to trial unless the parties can reach an accommodation that will resolve
this case short of additional litigation.

                                        BACKGROUND2

       Plaintiff E&E Enterprises won a firm fixed-price, indefinite-delivery indefinite-quantity
contract with the Defense Information Systems Agency and the Defense Information Technology
Contracting Organization to acquire satellite-based computer technology for use by the Defense
Commissary Agency. The system that plaintiff was to assemble would provide a computer
network infrastructure to connect military commissaries to each other and to the Defense
Commissary Agency’s main network.

       This was a four-year contract potentially, starting with one $3,922,443.79 base year term
and three one-year options. The contract included a standard termination for convenience clause
that permitted the Government to withdraw from the contract without being in default. The
clause provides that in event of termination, plaintiff would be compensated for its work
performed prior to termination as well as miscellaneous costs not including lost profits.

       The contract required plaintiff to provide access to Digital Subscriber Lines and Very
Small Aperture Broadband Services, known as VSAT, and employ Microsoft Exchange. Plaintiff
agreed to provide all required supplies and services to the Agency pursuant to this turn-key
contract. Delivery orders or task orders with a minimum value of $5,000 would be used to
purchase needed components of the system.

        A Performance Work Statement made a part of the contract described what contract
performance entailed, including the installation of four pilot test sites. Plaintiff submitted a pilot
site plan in August of 2008. Agency acceptance of performance at the pilot sites would allow
further ordering under the contract; i.e., additional participation by E&E in the contract was
contingent on the Government’s acceptance of performance at each of the four pilot sites.

       The pilot sites were at Sugar Grove, West Virginia, and Oceana, Virginia -- defendant
accepted those sites in November 2008. A site in Ramstein, Germany, was accepted in January
2009. The fourth site would be at Okinawa, Japan, known as PACRIM.

2
  For additional information concerning the nature of this case, the contracting vehicle, and a
history of the proceedings, see E&E Enterprises Global, Inc. v. United States, 120 Fed. Cl. 165
(2015).

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        The site at PACRIM became a problem for plaintiff because the Agency discovered that
temporarily, it did not have the funds to complete the project. Meanwhile, however, plaintiff had
ordered supplies and services needed for the site from its own suppliers when the contracting
officer assured E&E that the funds were forthcoming. The resulting delay in completing
PACRIM caused concern among Agency personnel.

        Internal email communications show that individuals among Agency management were
concerned about the risk of employing small network providers, including this plaintiff. The
contracting officer warned that E&E’s expenses during defendant’s delay of the PACRIM pilot
site could bankrupt plaintiff.

        Agency management believed that remaining with “big telecom players” as opposed to
contractors such as E&E would mitigate their operating risks. This appears to be the basis upon
which the contracting officer was told to terminate the contract. Another alleged basis for
termination was that the Agency was considering upgrading to Sprint MPLS technology before
issuing the original Solicitation for a VSAT solution.

       After reordering the cancelled PACRIM site on March 5, the contracting officer
terminated plaintiff’s contract for convenience of the Government on March 12, 2009. Defendant
paid E&E $473,588.35 upon negotiation of the convenience termination settlement. This amount
included prorated Monthly Recurring Costs and reimbursement for plaintiff's preparation costs
incurred for the cancelled PACRIM task order.

        Plaintiff submitted a certified claim for additional damages to the Agency in November
2012. The claim included alternative theories of recovery: Alternative I requested damages
totaling $1,534,470.82 for the additional costs associated with the termination; Alternative II
contained plaintiff’s contention that the Agency terminated for convenience in bad faith.
Plaintiff's total claimed damages was $2,273,022.70. Defendant agreed to award an additional
$97,900.31 for Alternative I, and denied Alternative II entirely. It would be helpful to the court if
the parties could submit documentation clearly outlining the amount of the termination for
convenience award, including plaintiff’s incurred costs and defendant’s reimbursements, and any
other payments made to the plaintiff.

                                         DISCUSSION

       Plaintiff filed a Complaint in this court alleging breach of contract, breach of the implied
duty of good faith and fair dealing, and violation of Federal Acquisition Regulation 49.101. FAR
49.101 provides general authority in the contracting officer to terminate a contract and includes
provisions limiting that authority depending on various circumstances.

        This court has granted a motion by defendant to dismiss Counts III and IV of plaintiff's
Alternative I claim because plaintiff did not appeal the agency’s denial of that claim. That is the
law of this case.

       We expect to schedule a hearing soon after issuance of this Opinion and Order to
schedule pre-trial activities and to discuss with the parties various issues of fact that prevent a

                                                -3-
ruling on summary judgment. For example, whether the contracting officer was satisfied that
plaintiff could manage contract requirements given the VSAT system that would be employed;
whether defendant’s prior experience with a vendor on this same system should have alerted it to
needed changes before seeking new bids; and what the contracting officer meant by having an
understanding with vendors that the contract’s intent was to “order all sites, costs allowing.”

                                       CONCLUSION

        We have not attempted to discuss the issues presented by plaintiff and defendant in detail
in this Opinion and Order denying cross-motions for partial summary judgment. The facts are
complex because of the nature of this contract, and the parties have presented legal claims and
defenses that may depend on factual determinations that must be made at trial.

       The court will meet with counsel in the near future to schedule pre-trial deadlines and to
highlight the factual issues in dispute. Meanwhile, plaintiff’s Motion for Partial Summary
Judgment, filed March 27, 2017, is DENIED; defendant’s Motion for Partial Summary
Judgment, filed April 27, 2017, is DENIED.

       IT IS SO ORDERED.
                                                     s/   Robert H. Hodges, Jr.
                                                     Robert H. Hodges, Jr.
                                                     Senior Judge

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