ACE-Fed Reporters, Inc. v. Barram

• Decision Date: 28 September 2000
• Docket Number: ACE-FEDERAL,AR-TI
• Citation: 226 F.3d 1329
• Parties: (Fed. Cir. 2000) REPORTERS, INC., ANN RILEY & ASSOCIATES, LTD.,RECORDING, INC., CALIFORNIA SHORTHAND REPORTING, EXECUTIVE COURT REPORTERS and MILLER REPORTING CO., INC., Appellants, v. David J. Barram, ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION, Appellee. 99-1258 DECIDED:
• Court: U.S. Court of Appeals — Federal Circuit

Page 1329

226 F.3d 1329 (Fed. Cir. 2000)

ACE-FEDERAL REPORTERS, INC., ANN RILEY & ASSOCIATES, LTD., AR-TI RECORDING, INC., CALIFORNIA SHORTHAND REPORTING, EXECUTIVE COURT REPORTERS and MILLER REPORTING CO., INC., Appellants, v. David J. Barram, ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION, Appellee.

99-1258

United States Court of Appeals for the Federal Circuit

DECIDED: September 28, 2000

Appealed from: General Services Administration Board of Contract Appeals

Ronald K. Henry, Kaye, Scholer, Fierman, Hays, Handler, LLP, of Washington, DC, argued for appellants. Of counsel was Mark A. Riordan.

Richard P. Schroeder, Trial Attorney, Commercial Litigation Branch, Civil Division, Department of Justice, of Washington, DC, argued for appellee. With him on the brief were David W. Ogden, Assistant Attorney General; David M. Cohen, Director; and Harold D. Lester, Jr., Assistant Director. Of counsel on the brief was John E. Cornell, Sr. Assistant General Counsel, Office of the General Counsel - LP, General Services Administration, of Washington, DC.

Before MAYER, Chief Judge, MICHEL and SCHALL, Circuit Judges.

MAYER, Chief Judge.

Ace-Federal Reporters, Inc., Ann Riley & Associates, Ltd., AR-TI Recording, Inc., California Shorthand Reporting, Executive Court Reporters, and Miller Reporting Co., Inc. (collectively, the "contractors") appeal from a decision of the General Services Administration (GSA) Board of Contract Appeals, denying their claims for breach of contract. See Ace-Federal Reporters, Inc. v. Gen. Servs. Admin., 99-1 B.C.A. (CCH) ¶ 30,139 (Oct. 30, 1998). Because the board erred in concluding that the terms of the contracts preclude recovery of lost profits, we reverse and remand.

Background

In 1988, GSA issued a request for proposals for transcription and court reporting services for various federal agencies. The request for proposals contemplated multiple award schedule contracts to be "made with more than one supplier for comparable items at either the same or different prices for delivery to the same geographical area." 41 C.F.R. § 101-26.408-1(A) (1988). GSA awarded contracts to ten companies, including the six appellants.

Included in each contract was the standard requirements clause found in Federal Acquisition Regulation § 52.216-21(c) which provides, "[e]xcept as this contract otherwise provides, the Government shall order from the Contractor all the supplies or services specified in the Schedule that are required to be purchased by the Government activity or activities specified in the Schedule." 48 C.F.R. § 52.216-21(c) (1988). Each contract also included a termination for convenience clause that limited government liability should GSA cancel them. The parties stipulated that during the term of the contracts, some of the agencies covered by the contracts contracted for transcription services with companies that were not parties to the contracts. According to 41 C.F.R. § 101-26.401-3 (1988), and other evidence in the record, this was not permitted absent a waiver from GSA.

In 1995, the contractors filed claims with the contracting officer alleging breach of their contracts because of the unauthorized off-schedule purchases and seeking lost profits and consequential damages. The contracting officer declined to take action. The contractors appealed to the board, which consolidated their claims. Before the board, GSA raised six defenses to any potential liability: (1) the termination for convenience clause precludes recovery of lost profits; (2) the contractors should not recover damages because they had received orders in excess of estimates in the request for proposals; (3) grand jury reporting was not covered by the contracts; (4) off-schedule purchases made at a lower price were permissible; (5) the contracts were illusory because the exceptions, when taken together, rendered the consideration valueless; and (6) the contractors' claims are barred by the statute of limitations in the Contract Disputes Act, 41 U.S.C. § 605(a), as amended by the Federal Acquisition Streamlining Act of 1994, Pub. L. No. 103-355, § 2351, 108 Stat. 3243, 3322 (1994).

The board specifically rejected the last defense, but did not address the remainder of them because it decided sua sponte that because these were not requirements contracts, none of the contractors were guaranteed any business. Therefore they were not entitled to lost profits or consequential damages. The contractors appeal, but do not seek review of the board's denial of their claims for consequential damages.

Discussion

We have jurisdiction over an appeal from a decision of an agency board of contract appeals by virtue of 28 U.S.C. § 1295(a)(10) (1994). The only issues in this case are questions of law which we review de novo. See Caldwell & Santmyer, Inc. v. Glickman, 55 F.3d 1578, 1581 (Fed. Cir. 1995).

"[C]ontract terms . . . must fit into one of the three possible types of supply contracts: those for a definite quantity, those for an indefinite quantity and those for requirements," Torncello v. United States, 681 F.2d 756, 761-62 (Ct. Cl. 1982), although we should not be blinded by how one labels a contract. See Maint. Eng'rs, Inc. v. United States, 749 F.2d 724, 726 n.3 (Fed. Cir. 1984). The government's argument is that because these contracts do not contain terms for a minimum or specific quantity, they are not enforceable unless they are requirements contracts. In distinguishing these contracts from requirements contracts, the government stresses that the contractual language allowed the agencies to consider other sources to assure that the purchases of services are made to the best advantage of the government. ¹ The government also emphasizes that none of the contractors had an exclusive arrangement to provide services.

The contractors respond that even though the contracts did not guarantee them any work individually, the contractual language should not be interpreted as allowing the agencies to ignore the regulatory and contractual obligations that restricted their placement of orders. The contractors further assert that lost profits are the appropriate remedy for this breach under Locke v. United States, 283 F.2d 521 (Ct. Cl. 1960).

In Locke, GSA awarded contracts for typewriter repair to four companies in the same geographic area. The contracts provided that the companies were to be listed in a Federal Supply Schedule. Under the contracts, government agencies were required, with few exceptions, to use the companies listed in the schedule. The agencies could choose any company from the schedule, and each company listed on the schedule was obligated to perform the services specified in the contract. Locke performed some services, but after several months GSA terminated the contract for default and removed his name from the schedule. Locke filed an appeal with GSA's board of review, which found that GSA terminated the contract without proper cause, but denied his request for lost profits.

On appeal, the government took the position that lost profits are not recoverable because the contract did not guarantee that any work would be available or that Locke would be awarded it over any other company on the schedule. The court disagreed, holding that the possibility of obtaining work from a listing in the schedule had real business value, even if there was no guarantee of obtaining a certain amount of work. The government also asserted that any damages were too speculative to prove. Again, however, the court determined that "the plaintiff gave valuable consideration for the promise of a performance which would have given him a chance at business and profit," and "where the value of a chance for profit is not outweighed by a countervailing risk of loss, and where it is fairly measurable by calculable odds and by evidence bearing specifically on the probabilities that the court should be allowed to value that lost opportunity." Id. at 524.

A contract is not unenforceable merely because it does not fit neatly into a recognized category. To be valid and enforceable, a contract must have both consideration to ensure mutuality of obligation, see generally Restatement (Second) of Contracts §§ 71, 72 (1981), and sufficient definiteness so as to "provide a basis for determining the existence of a breach...