Kalvar Corp., Inc. v. United States

• Decision Date: 20 October 1976
• Docket Number: No. 249-75.,249-75.
• Citation: 543 F.2d 1298
• Parties: KALVAR CORPORATION, INC. v. The UNITED STATES.
• Court: U.S. Claims Court

543 F.2d 1298

KALVAR CORPORATION, INC. v. The UNITED STATES.

No. 249-75.

United States Court of Claims.

October 20, 1976.

COPYRIGHT MATERIAL OMITTED

Valentine B. Deale, Washington, D.C., attorney for plaintiff.

Richard J. Webber, Washington, D.C., with whom was Asst. Atty. Gen. Rex E. Lee, Washington, D.C., for defendant.

Before COWEN, Chief Judge, DURFEE, Senior Judge, and SKELTON, Judge.

ON DEFENDANT'S MOTION AND PLAINTIFF'S CROSS-MOTION FOR SUMMARY JUDGMENT

COWEN, Chief Judge.

This case is before the court following the court's order of June 8, 1976, directing the parties to file supplemental briefs to assist us in deciding whether the matter in dispute may be disposed of on the pending motions for summary judgment, or should be remanded for trial.

Plaintiff Kalvar Corporation was granted a "primary source of supply" contract to provide the General Services Administration (GSA) with its 1973 requirements of film having a speed rating between 1.05 and 1.45. As acknowledged under the contract, the precise extent of the GSA requirements was to be determined by orders placed by various Government agencies through the Federal Supply Schedules.

On October 19, 1972, the Internal Revenue Service requested the GSA to supply film to meet special needs of the IRS for fiscal year 1973; specifically, the IRS sought Kalvar's M-200 film, and HS-66 film to be supplied by the Xidex Corporation. (Xidex had been a primary source supplier to GSA in the year preceding Kalvar's contract.) The GSA determined, on the basis of information supplied by Kalvar and Xidex regarding their own films, that the films requested by the IRS were beyond the scope of Kalvar's primary source contract. Kalvar contracted to supply one thickness of its M-200 film in an amendment to its original contract, and Xidex entered into an additional contract with GSA to supply three thicknesses of its H-66 film.

In December 1972, Kalvar notified GSA that it disputed the additional contract with Xidex and withdrew its prior offer to supply the M-200 film. Kalvar had tested Xidex' HS-66 film and claimed it to be within the specifications of Kalvar's original primary source contract. It then became Kalvar's contention that all GSA requirements, including the special order of the IRS, could be satisfied from Kalvar's original contract, and consequently that the GSA had breached its primary source contract by not limiting its supply to Kalvar. The GSA rejected Kalvar's contention in administrative negotiations as did the Comptroller General upon subsequent appeal. Plaintiff then commenced a breach of contract action in this court.

At oral argument, plaintiff's breach suit was apparently foreclosed by defendant's showing that it had discovered, after the briefs had been filed, that the contract incorporated standard provisions which, under the court's decision in John Reiner & Co. v. United States, 325 F.2d 438, 163 Ct.Cl. 381 (1963), cert. denied, 377 U.S. 931, 84 S.Ct. 1332, 12 L.Ed.2d 295 (1964), effectively convert any breach to a termination for convenience by the Government. On June 8, 1976, the court issued an order wherein we specifically found that such a termination-for-convenience clause was a part of the contract and requested the parties to submit supplemental briefs to determine: (1) whether defendant had evinced bad faith or a clear abuse of discretion in its actions; and (2) whether plaintiff has incurred any costs that are recoverable under the termination-for-convenience clause.

After consideration of the supplemental briefs of the parties, as well as their briefs in cross-motions for summary judgment, we find that plaintiff has failed to make a sufficient showing of bad faith or abuse of discretion by the Government. The assertions which plaintiff sets forth in its supplemental brief were all presented at oral argument and were denied by the court's order of June 8, 1976. Even if the order is disregarded and we examine each of the claims against the facts of record, we find that plaintiff has not made a sufficient showing of Governmental bad faith or abuse of discretion to raise a triable issue.

As to plaintiff's claims for recoverable costs incidental to a termination for convenience, we deny all of the specified claims as being outside the scope of the termination clause. However, we remand the case to the trial judge for a determination of the reasonable value of the legal services rendered by plaintiff's attorney in the preparation of its supplemental brief to the court.

I. Plaintiff's Claim of Governmental Bad Faith

Kalvar would infer Governmental bad faith from the "egregious nature" of the alleged contract violation, from a "pattern of uneven, discriminatory administration" against it and in favor of Xidex, and from an alleged "willful indifference" to Government regulations. Kalvar makes no conceptual distinction between "bad faith" and "abuse of discretion" and, for the purposes of this decision, we accept Kalvar's equation of the two concepts.¹ To support its claims of bad faith, Kalvar presents six specific "illustrations" of GSA's "clear abuse of discretion." These six illustrations center upon four specific acts of the GSA:

A. That GSA "deliberately withheld" information from Kalvar regarding the IRS' special requirement for film and failed to give it the first opportunity to meet the special requirement under the primary source contract.

B. That GSA applied a double standard of treatment when it sought out Xidex in 1973 for supplies of the IRS-requested film, since in 1972 GSA had refused an offer by Kalvar to supply "out of spec" film while Xidex held the primary source contract.

C. That GSA made a "wholly arbitrary finding" that Xidex' HS-66 film was beyond the specifications of Kalvar's primary source contract, based only on Xidex' representations and without confirmatory testing.

D. That although GSA made no distinction between Kalvar and Xidex film when it requested that the two companies' films be placed on the supply schedule, it contracted with Xidex for supply of film in three thicknesses, but contracted with Kalvar for supply of only one thickness.

II. The Merits of Kalvar's Claims of Bad Faith and Abuse of Discretion

Any analysis of a question of Governmental bad faith must begin with the presumption that public officials act "conscientiously in the discharge of their duties." Librach v. United States, 147 Ct.Cl. 605, 612 (1959). The court has always been "loath to find to the contrary," and it requires "well-nigh irrefragable proof" to induce the court to abandon the presumption of good faith dealing. Knotts v. United States, 121 F.Supp. 630, 631, 128 Ct.Cl. 489, 492 (1954).

In the cases where the court has considered allegations of bad faith, the necessary "irrefragable proof" has been equated with evidence of some specific intent to injure the plaintiff. Thus, in Gadsden v. United States, 78 F.Supp. 126, 127, 111 Ct.Cl. 487, 489-90 (1948), the court compared bad faith to actions which are "motivated alone by malice." In Knotts, supra, at 128 Ct.Cl. 500, 121 F.Supp. 636, the court found bad faith in a civilian pay suit only in view of a proven "conspiracy * * * to get rid of plaintiff." Similarly, the court in Struck Constr. Co. v. United States, 96 Ct.Cl. 186, 222 (1942) found bad faith when confronted by a course of Governmental conduct which was "designedly oppressive." But in Librach, supra, at 147 Ct.Cl. 614, the court found no bad faith because the officials involved were not "actuated by animus toward the plaintiff."

The mere fact that a contracting officer awards a contract to another company after terminating the plaintiff's contract is insufficient to show bad faith. As the court declared in Colonial Metals Co. v. United States, 494 F.2d 1355, 1361, 204 Ct.Cl. 320, 331 (1974):

* * * that the contracting officer knew of the better price elsewhere when he awarded the contract to plaintiff — in the absence of some proof of malice or conspiracy against the plaintiff (cf. Librach v. United States, 147 Ct.Cl. 605, 612-14 (1959)) — means only that the contract was awarded improvidently and does not narrow the right to terminate. Textual emphasis added.

In view of the high standard of proof required to show bad faith (tantamount to a showing of malice or conspiracy), the plaintiff here fails to make its case for two reasons. First, the plaintiff's four specific allegations of bad faith were made in the briefs or at oral argument, and thus have been decided by the court's June 8, 1976 order. The court stated in its order that "it does not agree that the facts shown in the record * * * would enable the court to determine that the defendant was guilty of bad faith * * *." Since there are no new claims of bad faith, and no new evidence beyond plaintiff's vague offer to produce "testimony by cognizant personnel of plaintiff" (see, e. g., Plaintiff's Supplemental Brief, p. 4), the court may justifiably deny plaintiff's motion.

Second, even if it is assumed that the court's June 8, 1976 order did not finally dispose of plaintiff's arguments, a close examination of these contentions in the light of the available facts discerns no support for a finding of bad faith or abuse of discretion. Plaintiff's first charge is that the GSA had an obligation to disclose to it, as primary source supplier, the IRS special request before seeking new contracts. But as defendant pointed out in its moving brief, the Comptroller General ruled that the GSA had no such duty under the primary source contract. Even if defendant's and the Comptroller General's interpretations of the contract were incorrect, an incorrect reading of the contract by Government officials is not tantamount to malice or bad faith. Nolan Bros. Inc. v. United States, 405 F.2d 1250, 1253, 186 Ct.Cl. 602, 606 (1969).

Plaintiff's second charge of bad faith is that in 1972 the GSA had rejected Kalvar's offer to provide film beyond the specifications...