Court Opinion

ID: 4681670
Source: CourtListenerOpinion
Date Created: 2021-04-28 15:00:16.146014+00
Date Added: 2024-06-11T08:04:02.670399
License: Public Domain

ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeals of --                                 )
                                              )
John Shaw LLC d/b/a Shaw Building Maintenance )           ASBCA Nos. 61379, 61585
                                              )
Under Contract No. AAFES REZ-09-002-10-026 )

APPEARANCE FOR THE APPELLANT:                             Ian Morris, Esq.
                                                           Morris Law Charlotte
                                                           Huntersville, NC

APPEARANCES FOR THE GOVERNMENT:                           Scott N. Flesch, Esq.
                                                           Army Chief Trial Attorney
                                                          CPT Richard W. Hagner, JA
                                                          Robert B. Neill, Esq.
                                                           Trial Attorneys

                OPINION BY ADMINISTRATIVE JUDGE OSTERHOUT

        Appellant John Shaw LLC d/b/a Shaw Building Maintenance (Shaw LLC or
appellant) claims costs associated with its federal and state tax liability, interest from late
payment of invoices, the cost of lost equipment, and Mr. Shaw’s hourly rate for phone
calls placed in pursuit of these costs. These allegedly result from a 3-year delay in
payment of 2 of its 36 invoices related to a janitorial services contract with the Army &
Air Force Exchange Service (Army or government). For the reasons discussed below, we
deny these appeals.

                                   FINDINGS OF FACT

       We have previously issued three decisions in these appeals: John Shaw LLC d/b/a
Shaw Building Maintenance, ASBCA No. 61379, 18-1 BCA ¶ 37,003; John Shaw LLC
d/b/a Shaw Building Maintenance, ASBCA No. 61379, 18-1 BCA ¶ 37,026; and
John Shaw LLC d/b/a Shaw Building Maintenance, ASBCA Nos. 61379, 61585, 19-1 BCA
¶ 37,216. Familiarity with those decisions and the facts discussed therein is presumed.
However, we reiterate several relevant facts here for clarity.

       1. On May 2, 2010, the Army awarded Contract No. AAFES REZ-09-002-10-026 to
Shaw LLC, valued at $358,000 (R4, tab 1 at 3). The contract was to furnish all personnel,
supervision, equipment, tools, materials, and supplies for janitorial services in the shoppette
and shopping center at Eielson Air Force Base in Alaska (id. at 7, 36). The contract
contained a clause subjecting this contract to the Contract Disputes Act (CDA) of 1978,
stating “all disputes arising under or relating to this contract shall be resolved under this
clause” (id. at 13). Exhibit C, Section 6.b(2)(a) stated payment was required within 30 days
“after receipt of a proper invoice” (id at 30). Section 6.b(10) stated “[a]ny interest penalties
due to contractors will be computed in accordance with the Prompt Payment Act, 31 U.S.C.
§§ 3901-3906, as amended” (id. at 31).

       2. On May 31, 2012, the government issued “Amendment 1,” exercising the first
option year in the contract to extend services to cover June 1, 2012, through May 31, 2013
(R4, tab 2 at 1).

       3. Appellant sent invoice no. 2701 to the government on November 25, 2012.
Appellant also sent invoice no. 2863 on April 29, 2013. Each was for $15,913.35. (R4,
tabs 15, 27 at 1-2)

        4. The contract expired on May 31, 2013, and was not renewed by the contracting
officer (CO) (R4, tab 2 at 1; tr. 73-75). At this time, invoice nos. 2701 and 2863 were
still outstanding (R4, tab 25).

       5. The government issued a check for $31,826.70 for the two outstanding invoices
on September 30, 2016, and appellant cashed it on October 3, 2016. The government
also calculated 47 days of Prompt Payment Act (PPA) interest and issued a check for
$76.30 for both invoices on October 26, 2016, which appellant cashed on November 3,
2016. (R4, tab 25 at 2, 4, tab 37 at 1-3)

       6. On March 20, 2017, Shaw LLC submitted a claim to the Army CO for
$419,781.01. This was calculated by attributing $9,045.84 for loss of explosion-proof
equipment, $2,009.77 in PPA interest, and the rest in punitive damages. While the claim
recognized the government “paid good faith amount of $31,826.70 to offset a portion of
losses,” the claim also alleged that the government had failed to timely pay two of
appellant’s invoices, resulting in appellant’s use of funds from an unrelated contract.
Also as a result, appellant was required to pay for storage of its explosion-proof
equipment in Alaska that it could not ship back to North Carolina, where Shaw LLC was
based. Appellant further alleged that its failure to pay those storage fees resulted in the
storage company selling the equipment to cover those costs. (R4, tab 13 at 3-4)

       7. On August 16, 2017, the CO denied the claim in full. The CO determined that
appellant was not timely paid these two invoices because it had contacted Exchange
personnel regarding updating its payment account information, but not the Army CO, as
required by the contract. The CO further found no basis in the contract for punitive
damages for appellant failing to secure future contracts, and thus there was no basis for
the punitive damages claim. (R4, tab 14) Appellant timely appealed this decision, and
the Board docketed it as ASBCA No. 61379.

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       8. The Board granted the government’s motion to dismiss the claim for punitive
damages in an earlier opinion issued in this appeal on March 8, 2018. Shaw LLC,
18-1 BCA ¶ 37,026. On March 27, 2018, Shaw LLC submitted an amended claim to the
CO for $2,916,323.61. This included the $31,826.70 for outstanding invoices which it
previously stated had been paid, and added $2,986.81 for taxes owed to the state of
Alaska, $14,636.00 for federal taxes owed to the IRS, $4,662 for labor in making
telephone calls to pursue this claim, $645,154.49 in exemplary damages, and $2,206,002
for “missed opportunities.” (R4, tab 23 at 1-2)

        9. On March 29, 2018, the CO denied the amended claim in full. The CO cited
his previous decision for the equipment and PPA interest claims and the ASBCA’s
decision dismissing the “missed opportunities” claim. The CO observed that the invoice
claims were for invoices that had been paid in 2016. Finally, the claims for federal and
state taxes, telephone bills, and exemplary damages failed “to provide a basis in the
contract to support the total losses [appellant has] identified.” (R4, tab 31) Appellant
appealed this denial to the Board on April 9, 2018. The Board docketed this as ASBCA
No. 61585.

       10. The government issued two checks to appellant on April 19, 2018, and May 1,
2018, for one year of PPA interest for both invoices minus the amount previously paid in
2016. The interest for invoice no. 2701 was $486.81, while the amount for invoice no. 2863
was $486.16. (R4, tab 37 at 3) However, the government used the rate of 3.25%, rather than
what it believes were the correct rates for two different parts of the year, 1.75% and 1.375%
(R4, tab 37 at 2).

                                        DECISION

        We previously granted the government’s pre-hearing motion to dismiss the claims
for the unpaid invoices, “missed opportunities,” and exemplary damages. Shaw LLC,
19-1 BCA ¶ 37,216. The remaining requests for relief concern $9,045.84 for loss of
appellant’s equipment; $2,986.81 for taxes owed to the state of Alaska; $14,636 in
federal taxes owed to the IRS; $4,662 in the labor costs of making telephone calls; and
$2,009.77 in PPA interest, totaling $33,340.42. Appellant argues in its pre-hearing brief 1
that these losses were due to a breach by the government of the duty of good faith and
fair dealing implied in every contract. The Army argues that while many of these costs

1   At the hearing, the parties agreed appellant would file a post-hearing brief, the
         government would then respond, and appellant would submit a reply (tr. 100).
         Appellant failed to submit an initial brief or a reply to the government’s
         post-hearing brief. We thus review appellant’s arguments articulated in its
         pre-hearing brief and during the hearing.
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amount to consequential damages and thus are not allowed, none are causally connected
to the alleged breach anyway.

        Appellant, as the proponent of the claim, has the burden of proof. Horton Constr.
Co., ASBCA No. 61085, 18-1 BCA ¶ 36,979 at 180,129. Every contract imposes upon
each party a covenant of good faith and fair dealing in its performance and enforcement.
Metcalf Constr. Co. v. United States, 742 F.3d 984, 990 (Fed. Cir. 2014). “The duty of
good faith and fair dealing imposes obligations on both contracting parties, including the
duty not to interfere with the other party’s performance and not to act so as to destroy the
reasonable expectations of the other party.” SIA Constr., ASBCA No. 57693, 14-1 BCA
¶ 35,762 at 174,986 (citing Centex Corp. v. United States, 395 F.3d 1283, 1304 (Fed. Cir.
2005)). However, this implicit duty “cannot expand a party’s contractual duties beyond
those in the express contract or create duties inconsistent with the contract’s provisions.”
Metcalf, 742 F.3d at 991 (quoting Precision Pine & Timber, Inc. v. United States, 596 F.3d
817, 831 (Fed. Cir. 2010)). “A breach of the duty of good faith and fair dealing may be
shown by proving, inter alia, a lack of diligence, willful or negligent interference, or a
failure to cooperate.” Id. (citing Malone v. United States, 849 F.2d 1441, 1445 (Fed. Cir.
1988)). “The proper inquiry regarding the duty often boils down to questions of
‘reasonableness’ of the government’s actions.” Relyant, LLC, ASBCA No. 59809,
18-1 BCA ¶37,085 at 180,539.

       Appellant has not pointed to any distinct acts that the government as an
organization, or any individual representative thereof, has engaged in which would
indicate a breach of this duty or would be considered unreasonable. While the
government admits it paid invoices no. 2701 and no. 2863 three years after the end of the
contract, in 2016 (findings 4-5), the government has also paid appellant one year of PPA
interest 2 (finding 10) for each of these invoices, which is the statutory maximum.
31 U.S.C. § 3907(b)(1). Appellant has not shown how these late payments were
unreasonable given the circumstances. Indeed, the government alleges that it made an
attempt to pay the invoices earlier, mitigating at least some of the delay, but was
prevented by appellant switching its banking information without informing the
government (gov’t br. at 5 ¶ 17). Appellant’s argument does not address this allegation.

       Appellant’s brief also alleges that the other invoices were routinely paid late, but
provides only allegations in litigation documents as proof. See app. br. at 4 ¶ 15 (citing
appellant’s original complaint) at 10-11 (citing the CDA and certification of claims
requirements). These allegations, standing alone, are unpersuasive.

2   The government argues in its pre- and post-hearing brief it has overpaid the amount of
         interest appellant is owed (gov’t br. at 10-11; finding 10). Appellant has not
         challenged this contention in its pre-hearing brief or during the hearing. The
         government states it does not intend to seek repayment (gov’t br. at 12).
                                              4
        Even if appellant had shown unreasonable governmental conduct, the connection
of that conduct to many of the damages appellant claims is tenuous, if present at all. For
example, appellant’s state tax liability appears to come from five years of interest for not
paying part of its taxes in 2013, and its federal tax liability covers 2012-2016, despite the
contract ending in 2013 (tr. 85-86). The only exception would be the PPA interest, but
appellant does not explain how it is entitled to interest beyond the statutory maximum for
these two invoices. Accordingly, appellant’s theory that it is entitled to the remaining
costs because the government breached the implied duty of good faith and fair dealing
must fail.

                                      CONCLUSION

       For the reasons discussed above, the appeals are denied.

       Dated: April 15, 2021

                                                   HEIDI L. OSTERHOUT
                                                   Administrative Judge
                                                   Armed Services Board
                                                   of Contract Appeals

 I concur                                          I concur

 RICHARD SHACKLEFORD                               OWEN C. WILSON
 Administrative Judge                              Administrative Judge
 Acting Chairman                                   Vice Chairman
 Armed Services Board                              Armed Services Board
 of Contract Appeals                               of Contract Appeals

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      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. 61379, 61585, Appeals of
John Shaw LLC d/b/a Shaw Building Maintenance, rendered in conformance with the
Board’s Charter.

      Dated: April 15, 2021

                                               PAULLA K. GATES-LEWIS
                                               Recorder, Armed Services
                                               Board of Contract Appeals

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