Court Opinion

ID: 6319943
Source: CourtListenerOpinion
Date Created: 2022-03-03 21:00:10.31852+00
Date Added: 2024-06-11T09:00:44.549985
License: Public Domain

ARMED SERVICES BOARD OF CONTRACT APPEALS
 Appeal of -                                   )
                                               )
 Cooper/Ports America, LLC                     )   ASBCA No. 61349
                                               )
 Under Contract No. HTC711-15-D-R036           )

 APPEARANCES FOR THE APPELLANT:                    W. Barron A. Avery, Esq.
                                                   Brian V. Johnson, Esq.
                                                    Baker & Hostetler LLP
                                                    Washington, DC

 APPEARANCES FOR THE GOVERNMENT:                   Jeffrey P. Hildebrant, Esq.
                                                    Deputy Chief Trial Attorney
                                                   Caryl A. Potter, Esq.
                                                   Lawrence M. Anderson, Esq.
                                                   Danielle A. Runyan, Esq.
                                                    Trial Attorneys

                  OPINION BY ADMINISTRATIVE JUDGE SWEET

        This appeal involves a contract between the government and appellant
Cooper/Ports America, LLC (C/PA) to provide stevedoring services. The government
originally entered into the contract with Shippers Stevedoring Co. (Shippers). However,
C/PA purchased Shippers’ interests in the contract, and entered into a novation agreement
with the government. C/PA seeks reformation of the contract’s prices based upon a
purported misrepresentation because the contracting officers (COs) allegedly promised
that they would “work with” C/PA on the contract’s prices and purportedly misstated the
existing fact that they could not revise the prices due to Shippers underbidding the
contract. We hold that C/PA has failed to show that it is entitled to reformation based
upon a misrepresentation because (1) the COs’ statements that they would work with
C/PA did not constitute a binding promise, let alone a promise to revise the contracts’
prices; (2) the COs did not misstate the existing fact that the government could not revise
the prices due to Shippers underbidding the contract; and (3) we cannot reform the
contract to make it illegal. Therefore, we deny this appeal.

                                  FINDINGS OF FACT

      1. On January 28, 2015, the United States Transportation Command (government)
awarded contract HTC711-15-D-R036 (036 Contract) to Shippers to provide stevedoring
and related terminal services at ports in the Southeastern United States (R4, tabs 1, 4).
The 036 Contract was a firm-fixed price contract (R4, tab 4 at 4-6).

      2. Shippers was losing money on the 036 Contract (tr. 22-23). Therefore, it
approached the entity that ultimately became C/PA about an acquisition (tr. 122-23). 1
C/PA was interested in purchasing Shippers’ assets, but was hesitant to acquire the
036 Contract because Shippers’ prices were too low. Nevertheless, Shippers insisted
upon the 036 Contract being included in the transaction. (Tr. 21-24)

       3. During a coffee break at a meeting in May 2016, Christopher Smith, who
subsequently became a C/PA Board Member (tr. 119-20), discussed C/PA’s potential
acquisition of the 036 Contract with CO William Fugate (May Conversation) (tr. 108,
123-24). Mr. Smith explained that C/PA could not afford to assume the 036 Contract
because Shipper’s prices were too low. There is no evidence that Mr. Smith informed
CO Fugate that the reason that Shipper’s prices were too low was because Shippers
underbid the 036 Contract. (Tr. 108, 124)

        4. Mr. Smith testified that CO Fugate responded during the May Conversation
that “[w]e can’t discuss the rates with you here, the process would be first you have to
novate over the contract, you file a claim, and then we’d work with you; the government
is not in the business of putting other companies out of business” (tr. 124). CO Fugate
testified that he did not make the comment that the government is not in the business of
putting other companies out of business in the context of the 036 Contract. Rather,
CO Fugate testified that he made that comment in response to a more general criticism
from Mr. Smith that the government was always trying to make stevedoring contractors
lose money. (Tr. 109) CO Fugate also testified that he did not recall using the phrase
“work with.” However, CO Fugate testified that he told Mr. Smith:

               that we would make no guarantee that those rates would
               change. So Mr. Smith asked for what they could do. And on
               a firm-fixed-price contract, I said that they could submit a
               claim under the disputes clause and we would evaluate the

1
    Cooper/T. Smith and Ports America were two stevedoring/terminal-operating
        companies. Cooper/T. Smith and Ports American owned Integrated Marine
        Services, LLC (IMS), which purchased the 036 Contract from Shippers.
        Subsequently, IMS changed its name to Cooper/Ports America LLC. (Tr. 21-23,
        45) For ease of reference, we refer to the entity that became Cooper/Ports
        America as C/PA, regardless of whether it was known as IMS or Cooper/Ports
        America LLC at the time.

                                             2
              accusation; however, I would make no guarantee that those
              rates would be changed.

(Tr. 109-10) C/PA has presented no evidence contradicting the evidence that CO Fugate
made those comments. Moreover, there is no evidence that CO Fugate stated during the
May Conversation that the government could change prices on a fixed-price contract due
to underbidding. (Tr. 124) While we find it doubtful that CO Fugate would
independently make a virtually identical statement to that C/PA claims a different CO
subsequently made during a different conversation (finding 8), we assume without
deciding that CO Fugate stated during the May Conversation that the government would
work with C/PA on the 036 Contract’s prices (Prices). However, because there is no
evidence to the contrary, we find that: (1) CO Fugate clarified that any statement that the
government would work with C/PA merely meant that the government would evaluate
any claim; and (2) CO Fugate told C/PA that he made no guarantee that the government
would revise the Prices. (Tr. 109-10, 124)

       5. Effective September 30, 2016, C/PA purchased substantially all of Shippers,
including Shippers’ interests in the 036 Contract (R4, tab 13; app. supp. R4, tab 74
at 4,347). On September 30, 2016, Shippers and C/PA also submitted a request to the
government for novation regarding the 036 Contract (R4, tab 22 at 71-73).

       6. On October 1, 2016, C/PA began performing the 036 Contract (R4, tab 31).

       7. In October 2016, Chris Lewis, C/PA’s Vice President (tr. 212-13), contacted
William Seamon, who had replaced CO Fugate as CO (tr. 104-05, 170), to discuss the
Prices (October Conversation) (tr. 214). Mr. Lewis informed CO Seamon that “the
contract rates aren’t good,” and inquired how C/PA could revise the Prices. There is no
evidence that Mr. Lewis informed CO Seamon that the reason the rates were not good—
and that C/PA was seeking to revise the Prices—was because Shippers underbid the
contract. (Tr. 214-15, 223)

      8. According to Mr. Lewis, CO Seamon responded during the October
Conversation that:

              [T]hey’re not in business to put contractors out of business,
              and that he could not talk to me the day that I’m talking to
              him, because we’re not actually the contractor of record. So
              to have further conversations so they could work with us,
              [the] contract needed to be novated first and, after the contract
              was novated, we could have discussions about pricing or
              other terms.

                                             3
(Tr. 216-17) Mr. Lewis specifically recalled CO Seamon saying that “they would work
with us on prices” (id. at 218). However, CO Seamon testified that he did not use the
phrase work with (tr. 162). Instead, CO Seamon testified that he informed Mr. Lewis that
he could not discuss the Prices with C/PA because C/PA was not a party to the
036 Contract. CO Seamon further testified that he told Mr. Lewis that price discussions
could occur if C/PA became a party to the 036 Contract, and if it provided a written
reason for discussing the Prices. (Tr. 160-62) C/PA presented no evidence negating
CO Seamon’s testimony that he told Mr. Lewis that price discussions could occur if
C/PA provided a written reason for discussing the Prices. Moreover, there is no evidence
that CO Seamon stated during the October Conversation that the government could revise
the prices on a fixed-price contract due to underbidding. (Tr. 216-18) As discussed
above, we find it doubtful that CO Seamon and CO Fugate would independently make
virtually identical statements during separate conversations (finding 4). Nevertheless, we
assume without deciding that CO Seamon stated during the October Conversation that the
government would work with C/PA on the Prices (tr. 216-18). However, because there is
no evidence to the contrary, we find that CO Seamon clarified that any statement that the
government would work with C/PA merely meant that price discussions could occur if
C/PA provided a written reason for discussing the Prices (tr. 160-62).

      9. According to CO Fugate, CO Seamon, and other government personnel, the
government cannot revise rates on a firm-fixed price contract due to underbidding
because that would be unfair to competitors (tr. 111, 160-61, 174-75, 177, 179, 195, 197,
202).

       10. On November 15, 2016, the government signed a novation agreement,
approving the September 30, 2016 sale (R4, tab 10 at 8-9). Effective December 22, 2016,
the government issued a modification, which incorporated the novation agreement (id.
at 1).

       11. On January 27, 2017, C/PA requested revision to the Prices (R4, tab 42).

       12. On January 31, 2017, the government rejected C/PA’s request to revise the
Prices. Id.

       13. On February 27, 2017, the Commander of the 842nd Transportation Battalion
(Commander) emailed CO Seamon about C/PA’s financial hardships due to the fact that
Shippers “drastically underbid their commodity rates to attain selection for the contract.”
(R4, tab 50 at 3)

                                             4
        14. On March 15, 2017, C/PA submitted a notice of intent to file a claim (Notice).
The Notice stated that C/PA was entitled to reformation of the 036 Contract due to
impracticability and mutual mistake. The Notice also requested a meeting (R4, tab 15
at 1-4).

       15. C/PA and the government held a meeting on March 23, 2017 (R4, tab 16). At
that meeting, the government refused to discuss the Prices (tr. 36, 175) because it did not
believe that the Notice provided a compelling reason to revise the Prices (tr. 177-78).
Thus, the government informed C/PA that it could file a “legitimate claim,” which would
enable the government to speak with C/PA about the Prices (tr. 36, 38).

        16. On June 26, 2017, C/PA filed a request for equitable adjustment (REA),
asserting that the 036 Contract should be reformed due to a unilateral mistake (R4, tab 67
at 5-6).

      17. On August 1, 2017, C/PA filed a certified claim, asserting, inter alia,
misrepresentation (R4, tab 22 at 1, 7).

       18. The CO denied the claim on September 20, 2017 (R4, tab 23).

      19. C/PA appealed the denial of the claim, which we docketed as ASBCA
No. 61349.

        20. The government moved for summary judgment on the misrepresentation
claim. We denied that motion. We held that, drawing all reasonable inferences in favor
of C/PA, there was a genuine issue of material fact about whether the government made a
misrepresentation because “it is reasonable to infer from any statement that the
government would work with C/PA that the government would renegotiate the
036 contract’s prices . . . .” Cooper/Ports America, LLC, ASBCA No. 61349, 19-1 BCA
¶ 37,285 at 181,405 (C/PA I). However, we also held that “[w]hether the evidence from
Mr. Smith and Mr. Lewis constitutes clear and convincing evidence that the COs stated
that the government would work with C/PA—and whether the most reasonable inference
from that statement would be that the government would renegotiate the 036 Contract’s
prices—are issues that we cannot resolve at this stage.” Id.

       21. We held a hearing on May 17, 2021, and this appeal has been fully briefed.

                                             5
                                         DECISION

      C/PA has failed to show that it is entitled to reformation based upon a
misrepresentation. We have summarized the doctrine of reformation based upon a
misrepresentation as follows:

                Reformation is that remedy in equity by means of which a
                written instrument is made or so construed as to express or
                conform to the real intention of the parties when some error
                or mistake has been committed. Equity has jurisdiction to
                reform a written instrument where there has been a meeting
                of the minds and an agreement has actually been entered into,
                but the written instrument does not express what was actually
                intended by the parties, due to . . . mistake by one of the
                parties accompanied by inequitable conduct by the other
                party, such as for example, misrepresentation. Where, due to
                misrepresentation of one party and the mistake of the other, a
                written contract fails to express the agreement which they had
                manifested an intent that the writing should express, the
                victim of the misrepresentation can get a decree of
                reformation of the writing.

Rainbow Valley Corp, ASBCA No. 11691, 68-2 BCA ¶ 7,195 at 33,413-14 (citations
omitted). A promise accompanied by a misstatement of existing fact may constitute a
misrepresentation. Id. 2

2
    The parties dispute the proper standard of review (app. br. 36-37; gov’t br. 11; app.
         reply 7-9). It appears that, while a contractor need only prove a misrepresentation
         by a preponderance of the evidence (Lebolo-Watts Constructors 01 JF, LLC,
         ASBCA No. 59740, 21-1 BCA ¶ 37,789 at 183,426; King Aerospace, Inc.,
         ASBCA No. 57057, 16-1 BCA ¶ 36,451 at 177,651; Dale Ingram, Inc., ASBCA
         No. 12152, 74-1 BCA ¶ 10,436; Catalytic Engr. And Mfg. Corp., ASBCA
         No. 15257, 72-1 BCA ¶ 9,342), it must prove entitlement to reformation by clear
         and convincing evidence. Timber Investors, Inc. v. United States, 587 F.2d 472,
         475 (Ct. Cl. 1978); C/PA I, 19-1 BCA ¶ 37,285 at 181,404-05. In any event, we
         need not determine which standard of review to apply to which particular elements
         of C/PA’s claim here because, even under the lower preponderance of the
         evidence standard, we find that C/PA has failed to show that the government made
         a misrepresentation entitling C/PA to reformation.

                                              6
       Here, C/PA’s central argument is that it is entitled to reformation of the Prices
because the government made a misrepresentation. 3 In particular, C/PA argues that the
misrepresentation was a promise to work with it on the Prices, when, in fact, the
government could not revise prices on a fixed-price contract due to underbidding. (App.
br. 2-3, 35-37, 49-50) That argument fails for three alternative reasons.

        First, the government’s statement that it would work with C/PA on the Prices did
not constitute a binding promise, let alone a promise to revise the Prices. Courts have
repeatedly recognized that a statement that one party will “work with” another party is
too vague, indefinite, uncertain, and lacking clarity as to all essential terms to constitute a
binding promise. See Melanson v. Navistar, Inc., No. 13-CV-2018-D, 2014 WL 4375715
at *6-*7 (N.D. Tex., Sept. 4, 2014) (holding that an employer’s oral promise to a foreign
employee that it would work with human resources to obtain a permanent residence visa
was too vague, indefinite, uncertain, and lacking clarity as to all essential terms to
constitute a binding promise to sponsor the employee’s permanent residence application);
Battah v. Resmae Mortgage Corp., 746 F. Supp. 2d 869, 876 (E.D. Mich. 2010) (holding
that a bank’s promise to work with a borrower “is too vague to qualify as a specific
promise to modify [a] mortgage contract in lieu of foreclosure”). Thus, the government’s
statements here that it would work with C/PA on the Prices were too vague, indefinite,
uncertain, and lacking clarity as to all essential terms to constitute binding promises
(findings 4, 8).

       For example, the phrase “work with” is vague as to whether it means that the
government actually will revise the Prices, or merely discuss revising the Prices. 4
However, when read in context, it becomes clear that the government did not state that it
actually would revise the Prices because CO Fugate expressly stated during the May

3
  C/PA does not specify which contract it is seeking to reform. However, it cannot be
      seeking to reform the 036 Contract. Reformation modifies a contract so that it
      expresses the contracting parties’ real intent. Rainbow Valley, 68-2 BCA ¶ 7,195
      at 33,413-14. Shippers and the government could not have intended that the prices
      in the 0036 Contract be higher based upon a misrepresentation during the October
      and May Conversations because those conversations occurred after the award of
      the 0036 Contract (findings 1, 4, 7). Thus, C/PA must be seeking to reform the
      novation agreement to change the prices. However, as discussed above, the
      parties could not have intended to reform the novation agreement to revise the
      036 Contract’s prices because the government may not revise a fixed-price
      contract’s prices due to underbidding.
4
  C/PA’s definition of the phrase work with as to renegotiate is unhelpful because it just
      begs the question of whether the word renegotiate means to actually revise the
      Prices or merely to discuss revising the Prices (app. br. 49-50).

                                              7
Conversation that he made no guarantee that the government would revise the Prices
(finding 4). Rather, CO Fugate and CO Seamon told C/PA that any statement that the
government would work with C/PA merely meant that the government would evaluate
any claim and discuss the Prices if C/PA provided a written reason for discussing the
Prices (findings 4, 8). Those statements were too vague, indefinite, uncertain, and
lacking clarity as to all essential terms to constitute a binding promise. See Melanson,
2014 WL 4375715 at *6-*7; Battah, 746 F. Supp. 2d at 876.

        In any event, any promise to merely discuss the Prices would be insufficient to
establish C/PA’s reformation claim. When we reform a contract, we make it conform to
the parties’ real intention. Rainbow Valley, 68-2 BCA ¶ 7,195 at 33,413-14. Thus,
because, C/PA seeks to have us revise the Prices (app. br. 50), it must show that the
parties intended to agree to revise the Prices; and not merely to discuss revising the
Prices. As discussed above, the parties clearly did not intend to agree to revise the Prices
because CO Fugate told C/PA during the May Conversation that he made no guarantee
that the government would revise the Prices (finding 4). Therefore, C/PA has failed to
show that the government made the specific promise (i.e., to revise the Prices) that would
support the reformation it seeks (i.e., to revise the Prices). 5

        Second, there was no misstatement of an existing fact because the government
never stated that it could revise prices on a fixed-price contract due to underbidding
(findings 4, 8). Indeed, C/PA does not point to any specific government statements
indicating that the government could revise prices on a fixed-price contract due to
underbidding. Instead, C/PA argues that the government implied that it could revise
prices on a fixed-price contact due to underbidding by stating that it would work with
C/PA on the Prices in response to the purported disclosures of C/PA and the Commander
of the fact that Shipper’s underbid the fixed-price 036 Contract. (App. br. 39-42; app.
reply 4, 6) As an initial matter, C/PA does not cite any authority for the proposition that
it can establish a misstatement of an existing fact based upon an implied
misrepresentation (id.). Even if it could, C/PA has failed to show that there was an

5
    As discussed above, we find it doubtful that both CO Fugate and CO Seamon would
         independently make virtually identical statements during separate conversations
         that the government is not in the business of putting contractors out of business
         (findings 4, 8). In any event, that statement would be even vaguer than the
         statement that the government would work with C/PA, and thus less of a binding
         promise, let alone a binding promise to revise the Prices. On the contrary, the
         evidence shows that—at least CO Fugate—merely was responding to a general
         criticism that the government was always trying to make stevedoring contractors
         lose money (finding 4).

                                              8
implied misrepresentation here. C/PA has not shown that the government said that it
would work with C/PA in response to C/PA’s disclosure of the fact that Shippers’
underbidding the 036 Contract because C/PA merely disclosed that the Prices were too
low; it did not disclose that the reason that the Prices were too low was because Shippers
underbid the 036 Contract (findings 3, 7). Likewise, C/PA has not shown that the
government said that it would work with C/PA in response to the Commander’s
disclosure of the fact that Shippers may have underbid the 036 Contract because the
Commander did not make that disclosure until after the government made those
statements (findings 4, 8, 13). Because C/PA has failed to show an implied
misrepresentation—let alone an affirmative misstatement—C/PA has failed to establish a
misstatement of existing fact.

        Third, even assuming that there was a misrepresentation based upon a promise
accompanying a misstatement of existing fact, C/PA has failed to show that we should
reform the Prices because it has not shown that the parties real intention was to agree to
revise the Prices. In construing the parties’ real intention as part of a reformation, we will
not adopt a construction that violates a statute or regulations because contracts that
violate a statute or regulation are illegal and void, ABS Baumaschinenvertrieb, ASBCA
No. 48207, 00-2 BCA ¶ 31,090 at 153,515, and we avoid adopting an interpretation of a
contract that would render that contract void. NVT Tech., Inc. v. United States, 370 F.3d
1153, 1159 (Fed. Cir. 2004). Here, C/PA agrees wholeheartedly with the statements of
government witnesses that the government may not revise a fixed-price contract’s prices
due to underbidding (app. br. 2-3, 35-37). Given this fact (finding 9), we cannot
conclude that the parties’ real intention was to revise the underbid, fixed-price
036 Contract’s prices because that would violate a statute or regulation barring the
government from revising a fixed-price contract’s prices due to underbidding, and thus
render the contract void. Thus, we will not reform the 036 Contract to render it illegal.

        C/PA also argues that this case is nearly identical to Rainbow Valley (app. br.
47-50; app. reply 9-11). In Rainbow Valley, we reformed a contract where the
government promised to exercise its rights under a cancellation clause only when
necessitated by a national emergency, and misstated that the cancellation clause was
mandatory. 68-2 BCA ¶ 7,195 at 33,413-14. Rainbow Valley is very different than this
case. First, the government’s statement in Rainbow Valley that it would exercise its
rights under a cancellation clause only when necessitated by a national emergency was
sufficiently specific to constitute a binding promise (id.), unlike the government’s vague
statements that it would work with C/PA here (findings 4, 8). Moreover, in Rainbow
Valley, the government misstated an existing fact by affirmatively misstating that the
cancellation clause was mandatory, 68-2 BCA ¶ 7,195 at 33,413-14, while the
government did not make an affirmative misrepresentation—or even an implied
misrepresentation—here. Finally, in Rainbow Valley, the reformed contract sought by

                                              9
the contractor was legal, (id.), while the reform contract sought by C/PA would be illegal
here, according to C/PA. Because of those relevant differences, Rainbow Valley does not
support the conclusion that C/PA is entitled to reformation here.

        C/PA finally relies upon our holding in C/PA I that it is reasonable to infer from
any statement that the government would work with C/PA that the government would
renegotiate the Prices (app. br. 43-44; app. reply 17). That reliance is misplaced. C/PA I
involved a summary judgment motion, so it merely addressed whether, drawing all
reasonable inferences in favor of C/PA, there was a genuine issue of material fact
(finding 20). And indeed, C/PA I expressly held that it did not decide whether the most
reasonable inference from the statement that the government would work with C/PA was
that the government would renegotiate the Prices (finding 20). As discussed above, the
evidence establishes that the most reasonable inference was not that the government
would renegotiate the Prices by revising them because CO Fugate expressly told C/PA
that he made no guarantee that the government would revise the Prices (finding 4).
Moreover, any statements that the government would renegotiate the Prices by discussing
revising them were too vague, indefinite, uncertain, and lacking clarity as to all essential
terms to constitute binding promises; and would not support the price revision
reformation that C/PA seeks. Therefore, C/PA I does not compel us to conclude that
C/PA is entitled to reformation.

                                     CONCLUSION

       For the foregoing reasons, the appeal is denied.

       Dated: February 10, 2022

                                                   JAMES R. SWEET
                                                   Administrative Judge
                                                   Armed Services Board
                                                   of Contract Appeals

(Signatures continued)

                                            10
 I concur                                           I concur

 JOHN J. THRASHER                                   J. REID PROUTY
 Administrative Judge                               Administrative Judge
 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. 61349, Appeal of
Cooper/Ports America, LLC, rendered in conformance with the Board’s Charter.

       Dated: February 10, 2022

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

                                            11