Court Opinion

ID: 4034557
Source: CourtListenerOpinion
Date Created: 2016-09-16 20:02:42.642606+00
Date Added: 2024-06-11T14:36:56.584916
License: Public Domain

In the United States Court of Federal Claims
                                       No. 15-1167C
                                (Filed: September 16, 2016)

                                            )
 DEKATRON CORPORATION,                      )
                                            )
                       Plaintiff,           )
                                            )      Motion to Dismiss for Failure to State
 v.                                         )      a Claim; RCFC 12(b)(6); Contract
                                            )      Disputes Act, 41 U.S.C. § 7104; Bad
 THE UNITED STATES,                         )      Faith; Exercise of Option Year
                                            )
                      Defendant.            )
                                            )

       Ralph C. Thomas, III, McLean, VA, for plaintiff.

       Igor Helman, Commercial Litigation Branch, Civil Division, United States
Department of Justice, Washington, DC, with whom were Steven J. Gillingham, Assistant
Director, Robert E. Kirschman, Jr., Director, and Benjamin C. Mizer, Principal Deputy
Assistant Attorney General, for defendant. David R. Koeppel and Colin W. O’Sullivan,
Office of the Solicitor, United States Department of Labor, Washington, DC, of counsel.

                     ORDER DENYING MOTION TO DISMISS

       Pending before the court in the above-captioned Contract Disputes Act case is a

motion filed by defendant the United States (“the government”) to dismiss plaintiff

DekaTron Corporation’s (“DekaTron”) complaint for failure to state a claim pursuant to

Rule 12(b)(6) of the Rules of the United States Court of Federal Claims (“RCFC”). In its

complaint, DekaTron claims that it is entitled to damages for breach of contract on the

grounds that the United States Department of Labor (“DOL” or “the agency”) acted in

bad faith in declining to exercise an option year of a technical support services contract.
DekaTron seeks damages in the amount of $4,937,893.51, including $3,748,384.60 for

lost profits and $1,189,508.91 for leases, furniture, supplies, and other obligations.

I.     BACKGROUND

       A.     FACTUAL BACKGROUND

       The following facts are drawn from the complaint and are assumed to be true for

the purposes of ruling on the government’s motion to dismiss.

       DekaTron is a minority owned, service disabled veteran owned small business

incorporated in Delaware with its principal place of business in Camp Springs, Maryland.

Compl. ¶¶ 5, 13. On September 22, 2010, DOL awarded DekaTron an indefinite delivery

indefinite quantity (“IDIQ”) contract (no. DOLJ109630970) with a base year and four

one-year option periods to provide technical support services for the agency’s

departmental e-budgeting system. Compl. ¶¶ 6-7. DOL exercised the first and second

option years and awarded DekaTron two fixed price task orders (nos. DOLB129633991

and DOLB129634128). Compl. ¶¶ 8-10. However, DOL did not exercise the third

option year. Compl. ¶¶ 1, 25.

       According to the complaint, during DekaTron’s performance of the contract and

task orders, the contracting officer representative, Andrew Rider, harassed DekaTron

employees with racist, sexist, and religion-based remarks, including name calling,

yelling, and foul language. Compl. ¶¶ 12-13. Following an independent investigation,

DOL’s Equal Employment Opportunity (“EEO”) office found that this conduct violated

DOL’s “Harassing Conduct Policy.” Compl. ¶ 14. In addition to harassing DekaTron

employees, Mr. Rider also routinely held up processing of DekaTron’s invoices, applied

                                              2
penalties without discussion or investigation, and insisted on removal of labor hours.

Compl. ¶ 15. Further, Mr. Rider “signed a contract with another company obligating

services on behalf of DekaTron by falsely misrepresenting himself as a Program Manager

of DekaTron.” Compl. ¶ 16. DekaTron alleges that these and other steps Mr. Rider took

that hindered performance of the contract were directly connected to Mr. Rider’s

harassment of DekaTron’s employees. Compl. ¶ 17.

       DekaTron alleges that during this period of harassment, the contracting officer did

not respond to DekaTron’s communications. Compl. ¶ 18. The contracting officer

“eventually” removed Mr. Rider as the contracting officer representative for the contract

at issue. Compl. ¶ 20. However, Mr. Rider was the supervisor of his replacement and

Mr. Rider “was still being copied on documents regarding the DekaTron contract and

task orders.” Id.

       DekaTron alleges that contract problems, including “DOL-initiated delays in

contract performance, inconsistent directives from DOL, and nonpayment of DekaTron’s

properly submitted invoices in full,” continued “after the EEO’s finding of discriminatory

conduct by Mr. Rider and after Mr. Rider was replaced” as the contracting officer

representative. Compl. ¶ 21. DekaTron also alleges that its efforts to resolve these

contract administration issues with the contracting officer and other agency officials were

not successful. DekaTron claims that it requested alternative dispute resolution, which

DOL rejected. Compl. ¶ 22. In addition, DekaTron alleges that in August 2013, it filed a

complaint and request to intervene with DOL’s task order and delivery order

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ombudsman, which the ombudsman acknowledged receiving but did not act on until after

DOL failed to exercise the third option period of DekaTron’s contract. Compl. ¶ 23.

       DekaTron alleges that the contracting officer refused to communicate with

DekaTron “at all crucial times leading up to the Contracting Officer’s failure to exercise

Option Year 3.” Compl. ¶ 24. Specifically, the contracting officer did not respond to

inquiries from DekaTron as to whether the contracting officer would exercise option year

3 and “purposely let the time expire” for notifying DekaTron that it would exercise

option year 3. Compl. ¶ 25.

       On September 4, 2013, without informing DekaTron that option year 3 would not

be exercised, DOL issued a new solicitation (no. DOL131RP21821) under schedule 70 of

the General Services Administration’s Federal Supply Schedule (“FSS”) for substantially

the same work that DekaTron was performing. Compl. ¶ 26. DekaTron alleges that DOL

knew that DekaTron was not on the FSS and thus sought to exclude DekaTron from the

new competition. Compl. ¶ 26-28.

       B.     PROCEDURAL HISTORY

       DekaTron filed a certified claim with the contracting officer on July 11, 2014.

Compl. ¶ 29. The contracting officer filed a final decision denying the claim on October

10, 2014. Compl. ¶ 30. 1

1
  DekaTron also states that DOL sent DekaTron two notices to cure. Compl. ¶ 30. DOL
rescinded the first notice based on DekaTron’s response and DOL did not reply to DekaTron’s
response to the second notice. Id.

                                              4
       On October 9, 2015, DekaTron filed its complaint in this court. 2 On January 11,

2016, the government filed the pending motion to dismiss (ECF No. 9). The court stayed

consideration of the government’s motion to dismiss pending resolution by the Civilian

Board of Contract Appeals (“CBCA”) of an indirectly related case, DekaTron Corp. v.

Department of Labor, CBCA 4428, 16-1 BCA ¶ 36259 (ECF No. 18). On June 6, 2016,

the parties reported that they had reached a settlement agreement in the CBCA action but

that the settlement agreement did not resolve the claims in the case before this court (ECF

No. 19). On June 7, 2016, the court lifted the stay of proceedings in this case (ECF No.

20). The court heard oral argument on September 8, 2016.

II.    JURISDICTION

       The court has jurisdiction to hear this case under the Tucker Act, 28 U.S.C.

§ 1491(b)(1), and the Contract Disputes Act, 41 U.S.C. § 7104. See Coast Prof’l, Inc. v.

United States, No. 2015-5077, 2016 WL 3734671, at *4 (Fed. Cir. July 12, 2016) (“If a

contractor wishes to contest an agency’s decision regarding exercising an option under

the contract, such a challenge is a matter of contract administration governed by the

CDA.” (citing Jones Automation, Inc. v. United States, 92 Fed. Cl. 368, 371–72 (2010);

Gov’t Tech. Servs. LLC v. United States, 90 Fed. Cl. 522, 526 (2009))).

2
  DekaTron initially brought the claim in this case before the Civilian Board of Contract Appeals
(“CBCA”), which dismissed for lack of jurisdiction on the grounds that DekaTron’s appeal of
the contracting officer’s final decision was not timely. See DekaTron Corp. v. Dep’t of Labor,
CBCA 4444, 15-1 BCA ¶ 36045 (July 23, 2015).

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III.   LEGAL STANDARD

       The government asks the court to dismiss the complaint for failure to state a claim

upon which relief can be granted pursuant to RCFC 12(b)(6). To avoid dismissal under

RCFC 12(b)(6), “a complaint must allege facts ‘plausibly suggesting (not merely

consistent with)’ a showing of entitlement to relief.” Matthews v. United States, 750 F.3d
1320, 1322 (Fed. Cir. 2014) (quoting Kam-Almaz v. United States, 682 F.3d 1364, 1367

(Fed. Cir. 2012). “In deciding a motion to dismiss, the court must accept well-pleaded

factual allegations as true and must draw all reasonable inferences in favor of the

claimant.” Hartford Fire Ins. Co. v. United States, 772 F.3d 1281, 1284 (Fed. Cir. 2014)

(citation omitted).

IV.    DISCUSSION

       DekaTron claims that it is entitled to lost profits and other damages on the grounds

that DOL acted in bad faith when it failed to exercise the third option year of the contract.

In the pending motion, the government argues that DekaTron has failed to allege

sufficient facts to show that the contracting officer or the agency as a whole acted in bad

faith and thus the case must be dismissed for failure to state a claim.

       Generally, the government is not required to exercise an option period to a

contract if the contract places no restriction on the government’s discretion. See Gov’t

Sys. Advisors, Inc. v. United States, 847 F.2d 811, 812-13 (Fed. Cir. 1988). However,

“[a] contractor can recover for the government’s failure to exercise an option if the

government’s failure was in bad faith.” Bannum, Inc. v. United States, 80 Fed. Cl. 239,

                                              6
249 (2008) (citing Hi-Shear Tech. Corp. v. United States, 53 Fed. Cl. 420, 436 (2002);

Ho v. United States, 49 Fed. Cl. 96, 107 (2001)). 3

       Government officials enjoy a presumption of good faith in the performance of

their duties. See id. In order to show that the government acted in bad faith, a plaintiff

must demonstrate that the government acted with a “specific intent to injure the plaintiff.”

Am-Pro Protective Agency, Inc. v. United States, 281 F.3d 1234, 1240 (Fed. Cir. 2002)

(citing Kalvar Corp. v. United States, 543 F.2d 1298, 1302 (Ct. Cl. 1976)). Bad faith has

been found when a contracting officer representative acts with specific intent to injure or

the contracting officer fails to exercise independent judgment or remedy the contracting

officer representative’s animus, such as by removing the contracting officer

representative from responsibility. See Libertatia Assocs., Inc. v. United States, 46 Fed.

Cl. 702, 711-12 (2000). In addition, a government entity acts in bad faith if the aggregate

actions of its agents would constitute bad faith had the actions been performed by a single

individual. See Keeter Trading Co. v. United States, 79 Fed. Cl. 243, 264 (2007) (citing

North Star Alaska Hous. Corp. v. United States, 76 Fed. Cl. 158, 189 (2007); Libertatia

Assocs., 46 Fed. Cl. at 706, 710; Struck Constr. Co. v. United States, 96 Ct. Cl. 186, 221

(1942)).

3
  In Sundowner 102, LLC v. United States, 108 Fed. Cl. 737, 743 (2013), the court rejected the
plaintiff’s argument that the government violated the contractual duty of good faith and fair
dealing by failing to exercise an option. While there was no allegation of specific intent to injure
the plaintiff, the court noted that “[b]ecause the agency was under no contractual obligation to
continue exercising option years, it could not have been bad faith for the agency to end the
contract.” Id. This court elects to follow the precedent of Bannum, 80 Fed. Cl. at 249, rather
than the dicta in Sundowner, 108 Fed. Cl. at 743.

                                                 7
       In its motion to dismiss, the government argues that DekaTron fails to allege

sufficient facts to connect Mr. Rider’s bad behavior and alleged animus toward DekaTron

with the contracting officer’s decision not to exercise the third option period. The

government argues that DekaTron does not allege that Mr. Rider had any role in the

decision by the contracting officer not to exercise the option period to the contract or that

the contracting officer separately acted in bad faith. In addition, the government argues

that even considering the actions of DOL officials in the aggregate, the allegations in the

complaint show that the contracting officer acted in good faith by replacing Mr. Rider as

the contracting officer representative. Finally, the government argues that failing to

exercise the option and obtaining the same services under a different contract are not

alone sufficient to establish bad faith.

       In response, DekaTron argues that it has alleged sufficient facts to withstand a

motion to dismiss by alleging that the contracting officer failed to exercise independent

judgment or remedy Mr. Rider’s bad faith conduct. Although the contracting officer

eventually replaced Mr. Rider as the contracting officer representative, DekaTron argues

that the court must construe the factual allegations in the complaint in its favor and that

the court may infer that Mr. Rider continued to play a role in administering DekaTron’s

contract and task orders based on the allegation that Mr. Rider was his successor’s

supervisor and continued to be copied on documents regarding DekaTron’s contract and

task orders. DekaTron also alleges that because the contracting officer refused to

communicate with DekaTron, the contracting officer’s only information regarding

DekaTron came from Mr. Rider or Mr. Rider’s subordinate. DekaTron further argues

                                              8
that the contracting officer’s decision to issue a new solicitation under the FSS was done

purposely to harm DekaTron because the contracting officer knew that DekaTron would

not be eligible to compete for the award. For all of these reasons, DekaTron argues that it

has alleged sufficient facts in its complaint to also show that DOL officials acted in bad

faith in the aggregate.

       The court agrees with DekaTron that it has alleged sufficient facts to “plausibly . .

. show[] entitlement to relief.” See Matthews, 750 F.3d at 1322 (citing Kam-Almaz, 682
F.3d at 1367). The court finds that the factual allegations in the complaint, taken as true,

could support a finding that DOL acted with a “specific intent to injure the plaintiff” in

failing to exercise the option period to DekaTron’s contract. Am-Pro, 281 F.3d at 1240

(citation omitted).

       The allegations in the complaint suggest that Mr. Rider, as the contracting officer

representative and supervisor for the replacement contracting officer representative, may

have acted with animus toward DekaTron. These allegations are supported by EEO

findings, as described by DekaTron in the complaint, that Mr. Rider harassed DekaTron’s

employees and the allegations that Mr. Rider took other steps to hinder DekaTron’s

performance of the contract. And while it is true that the contracting officer removed

Mr. Rider from the contract, DekaTron also alleges that Mr. Rider continued to be copied

on documents and supervised his replacement. The complaint also includes allegations

regarding the contracting officer’s failure to communicate with DekaTron or otherwise

form an independent assessment of DekaTron’s work. These allegations suggest that the

contracting officer did not exercise independent judgment and further suggest that the

                                             9
decision not to exercise the third option year was related to DekaTron’s interactions with

Mr. Rider. The allegations in the complaint also suggest that the contracting officer had

no reason, other than to harm DekaTron, when she decided not to exercise the third

option year to DekaTron’s contract and decided to use the FSS so that DekaTron could

not compete for the new award.

       While bad faith is very difficult to establish, and damages may be challenging to

prove, it has been done in several cases. See, e.g., Keeter Trading Co. v. United States,

85 Fed. Cl. 613, 625 (2009), appeal dismissed, 333 F. App’x 511 (Fed. Cir. 2009);

Libertatia Assocs., 46 Fed. Cl. at 712; North Star Alaska Hous. Corp., 76 Fed. Cl. at 187-

90. Where, as here, there have been serious allegations of improper conduct of a

discriminatory nature by government procurement officials, which in this case were

independently confirmed by the DOL’s EEO, a plaintiff must be given the opportunity to

prove its case. None of the cases the government relies upon to the contrary involve

factual allegations of the nature stated in the subject complaint.

V.     CONCLUSION

       For the reasons stated above, the court finds that DekaTron has stated a claim

upon which relief can be granted. Therefore, the government’s motion to dismiss the

complaint pursuant to RCFC 12(b)(6) is DENIED. The government shall file its answer

to the complaint by November 1, 2016.

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IT IS SO ORDERED.

                         s/Nancy B. Firestone
                         NANCY B. FIRESTONE
                         Senior Judge

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