Court Opinion

ID: 4512300
Source: CourtListenerOpinion
Date Created: 2020-03-03 20:00:14.053466+00
Date Added: 2024-06-11T09:38:14.790548
License: Public Domain

ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeal of --                                          )
                                                      )
Nexagen Networks, Inc.                                )   ASBCA No. 60641
                                                      )
Under Contract No. Wl5P7T-13-D-E077/KX01              )

APPEARANCES FOR THE APPELLANT:                            David A. Rose, Esq.
                                                           Rose Consulting Law Firm
                                                           Valdosta, GA

                                                          Kendall R. Enyard, Esq.
                                                          Caitlin T. Conroy, Esq.
                                                           Steptoe & Johnson LLP
                                                           Washington, DC

APPEARANCES FOR THE GOVERNMENT:                           Scott N. Flesch, Esq.
                                                           Army Chief Trial Attorney
                                                          Dana J. Chase, Esq.
                                                           Trial Attorney

       OPINION BY ADMINISTRATIVE JUDGE O'CONNELL ON THE
      GOVERNMENT'S MOTION FOR PARTIAL SUMMARY JUDGMENT

        The Army has filed its second motion for partial summary judgment. In
Nexagen Networks, Inc., ASBCA No. 60641, 19-1BCA137,258, the Board granted
the government's first motion for summary judgment in part with respect to the
majority of the damages sought in Nexagen's claim for consequential damages. In its
new motion, the Army contends: 1) that appellant's claim is barred by the doctrine of
res judicata as a result of the Court of Federal Claims' decision in Nexagen Networks,
Inc. v. United States, 124 Fed. Cl. 645 (2015); and 2) the damages Nexagen seeks for
the task order option year are too remote and uncertain to be recoverable.

       Nexagen has filed a lengthy opposition in which it disputes some of the
government's proposed facts and proposes 96 additional facts, and contests the
government's legal arguments. The government has not filed a reply brief or
otherwise disputed any ofNexagen's 96 proposed findings. Because the Board
believes it is not necessary for purposes of the pending motion to detail Nexagen's
proposed findings, it suffices to state that Nexagen has a long list of grievances with
respect to the government's handling of the task order.
        STATEMENT OF FACTS (SOF) FOR PURPOSES OF THE MOTION

        A longer description ofNexagen's claims is included in the Board's first
opinion in this appeal (Nexagen, 19-1BCA137,258). The Board supplements the
facts from that opinion where necessary, including with facts drawn from the Court of
Federal Claims' opinion, which has not been appealed and is now final.

        As described in the Board's first decision, in May 2013 the Army awarded
Nexagen a multiple award indefinite-delivery/indefinite quantity contract to provide
software and systems engineering services. The appeal arises from a task order for
data strategy service and software support awarded in February 2015. The task order
contained base and option years and provided that "[t]he Government reserves the
right to exercise the option pursuant to FAR 52.217-9, 'Option to Extend the Term of
the Contract' found in Section I of the basic contract." (R4, tab 2 at 2) This clause
provides that the government "may" exercise the option but must give the contractor
notice at least 60 days before the contract expires. However, even if the government
gives this notice, it is not obligated to exercise the option. FAR 52.2 l 7-9(a).

       As related in our first opinion, on May 4, 2015, (that is, during the base year)
the contracting officer terminated the task order for default. He changed it to a
termination for convenience less than two weeks later. Nexagen, 19-1BCA137,258
at 181,325; (R4, tab 13-15).

       On May 6, 2015, a different contracting officer canceled the task order because
she had concluded that material flaws in the evaluation record made a re-evaluation
and subsequent award impossible. The Army subsequently issued a new task order
request. Nexagen, 124 Fed. CL at 649-50; (R4, tabs 60-61).

       On June 26, 2015, Nexagen filed a complaint at the Court of Federal Claims.
The action was in part a bid protest challenging the decision to issue a new task order,
and in part a claim for damages arising from the canceled task order. Nexagen,
124 Fed. CL at 652-54.

       On August 1, 2015, Nexagen for the first time submitted a certified claim to the
contracting officer seeking $40,244,379.94 related to the termination and an alleged
breach of the contract. The contracting officer notified Nexagen two weeks later that
she did not possess jurisdiction to consider the claim due to the pending action at the
Court of Federal Claims. Nexagen, 124 Fed. CL at 649, 652.

       On December 21, 2015, the Court dismissed Nexagen's claim for damages for
lack of jurisdiction because it had not submitted a claim to the contracting officer
before it filed suit. The Court further ruled that, to the extent that the action could be
read to challenge the termination for default, that claim was moot due to the

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contracting officer's conversion of the termination to one for the convenience of the
government prior to Nexagen filing the law suit.* Nexagen, 124 Fed. Cl. at 652-54.

        On December 22, 2015, Nexagen submitted to the contracting officer the claim
at issue in this appeal (R4, tab 20). It sought $37,597,526.94 for "Compensatory
Consequential Damages: Breach of implied covenant of good faith and fair dealing,"
and $2,646,853 for "Compensatory Expectation Damages: Breach of contract based
upon wrongful termination" (id. at 9). The contracting officer denied the claim except
for a prorated fee (profit) on the base year of$151,424.54 (R4, tab 22). Nexagen
timely appealed this decision to the Board.

                                      DECISION

I.     Nexagen 's Claim is Not Barred by the Doctrine of Res Judicata

       After the Board's decision on the government's first summary judgment
motion, Nexagen's $2,646,853 claim for expectation damages remained pending.
With respect to Nexagen's consequential damages claim, $7,409,260 remained
pending. The government contends that these claims are barred by the doctrine of
res judicata based on the Court of Federal Claims opinion described above.

        A claim is barred by res judicata when "( 1) the parties are identical or in
privity; (2) the first suit proceeded to a final judgment on the merits; and (3) the
second claim is based on the same set of transactional facts as the first." Cunningham
v. United States, 748 F.3d 1172, 1179 (Fed. Cir. 2014) (citation omitted). The second
prong of this test is clearly a problem for the government because the Court of Federal
Claims dismissed Nexagen's money claim for lack of jurisdiction. Nexagen,
124 Fed. Cl. at 652.

       The government points to the section of the Court of Federal Claims opinion
where it stated that it possesses jurisdiction to consider challenges to default
terminations. While that is correct, the Court never reached the merits of the
termination because it observed that the contracting officer had already provided the
only relief it could have awarded - conversion to a termination for convenience. This
was the only relief that the Court believed it could provide because a challenge to a
termination for default (a government claim) does not grant the Court jurisdiction to
consider a money claim that the contractor failed to submit to the contracting officer.
Nexagen, 124 Fed. Cl. at 652-54; DePonte Investments, Inc. v. United States,
54 Fed. Cl. 112, 115 (2002).

* The Court also dismissed Nexagen's challenge to the corrective action for lack of
      jurisdiction. Nexagen, 124 Fed. Cl. at 654.

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       Based on its determination that there was no relief it could provide, the Court
dismissed as moot the portion of the complaint raising allegations challenging the
termination. Nexagen, 124 Fed. Cl. at 654. The government contends that this was an
adjudication on the merits ofNexagen's claim that the termination was wrongful
(gov't mot. at 9) and, therefore, it bars litigation ofNexagen's claim that it is entitled
to damages as a result of a wrongful termination. The government does not cite
precedent supporting its position.

        As the Supreme Court has explained, "[a] case that becomes moot at any point
during the proceedings is 'no longer a 'Case' or 'Controversy' for purposes of Article III,'
and is outside the jurisdiction of the federal courts." United States v. Sanchez-Gomez,
138 S. Ct. 1532, 1537 (2018) (quoting Already, LLC v. Nike, Inc., 568 U.S. 85, 91 (2013)).
Because the contracting officer converted the termination to one for the convenience of
the government before Nexagen filed suit, Nexagen, 124 Fed. Cl. at 649, there never was a
case or controversy related to the termination, or a money claim, for which the Court
possessed jurisdiction and there can be no judgment on the merits. Accordingly, the
government's contention that the Court's decision on the default termination bars future
litigation of N exagen' s money claim based on res judicata, is incorrect.

II.    The Government is not Entitled to Summary Judgment on the Option Year

       The Board's initial decision in this matter highlighted the challenges that
Nexagen faces in recovering on its claim for a wrongful termination for convenience.
As we stated, a termination for convenience is conclusive unless the contractor can
show a clear abuse of discretion or that the government acted in bad faith. Nexagen,
19-1 BCA ,i 37,258 at 181,328 (citing T&M Distributors, Inc. v. United States,
185 F.3d 1279, 1283 (Fed. Cir. 1999)). A similar standard applies with respect to a
decision not to exercise an option. Nexagen, 19-1 BCA ,i 37,258 at 181,329 (citing
IMS Engineers-Architects, P.C., ASBCA No. 53471, 06-1BCA133,231, at 164,674,
recon. denied, 07-1 BCA ,i 33,467, aff'd, IMS Engineers-Architects, P.C. v. Geren,
274 F. App'x. 898 (Fed. Cir. 2008)).

       The Board's first decision observed that the contracting officer terminated the
task order seven months before the deadline for the preliminary notice to exercise the
option. This was far enough in the future that the Board was uncertain as to whether
we should treat the option like a claim for damages on a future contract, which is
considered too remote and speculative to award damages. Because the parties had not
addressed the option year in their briefs, the Board declined to rule. Nexagen,
19-1BCA137,258 at 181,328-29.

      In its new motion, the government cites Operational Services Corporation,
ASBCA No. 38703 et al., 93-3 BCA ,i 26,190, in which the government terminated for
convenience a contract two months into the performance of the first of two option

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years. The Board ruled in favor of appellant on entitlement, finding that it had proven
that the government had acted in an arbitrary and capricious manner. The Board held,
however, that the appellant's damages would be limited to the first option year because
there was no assurance that the government would exercise that option, nor was there
any right of appellant to insist that the government exercise it. Id., 93-3 BCA ,i 26,190
at 130,374.

         While Operational Services Corporation is consistent with the government's         I
position, the Board declines to enter summary judgment in its favor. The Board issued       )

the decision in Operational Services after a hearing. Operational Services, 93-3 BCA        I
,i 26,190 at 130,374. The record in this appeal is not as developed. For one thing,         I
Nexagen has disputed some of the government's proposed findings of fact. Further,
the government has not responded to Nexagen's lengthy counter statement of facts,           I
which alleges facts that, according to Nexagen, demonstrate bad faith or an abuse of
discretion. The Board believes that a hearing with witness testimony subject to cross
examination will be necessary to resolve the factual disputes. In a context where a
hearing is already necessary to determine whether Nexagen can demonstrate an abuse
of discretion or bad faith during the base year, the Board believes that there will be
little additional burden on the parties to introduce evidence concerning the option year.

       The Board denies the government's motion with respect to the option year.

                                    CONCLUSION

       The government's motion for summary judgment is denied.

      Dated: February 5, 2020

                                               1¥\~')1.01~
                                                  MICHAEL N. O'CONNELL
                                                  Administrative Judge
                                                  Armed Services Board
                                                  of Contract Appeals
(Signatures continued)

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     I concur                                       I concur

     RICHARD SHACKLEFORD                            J. REIITPROUTY
     Administrative Judge                           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 No. 60641, Appeal ofNexagen
     Networks, Inc., rendered in conformance with the Board's Charter.

           Dated:

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

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