Bell/Heery v. United States

• Decision Date: 31 July 2012
• Docket Number: No. 11-462 C,11-462 C
• Parties: BELL/HEERY, A JOINT VENTURE, Plaintiff, v. UNITED STATES OF AMERICA, Defendant.
• Court: U.S. Claims Court

BELL/HEERY, A JOINT VENTURE, Plaintiff,

v.UNITED STATES OF AMERICA, Defendant.

No. 11-462 C

United States Court of Federal Claims

July 31, 2012

Contract Disputes Act;

RCFC 12(b)(6); breach of

contract; implied covenant

of good faith and fair

dealing; constructive

change; cardinal change

Robert D. Windus, Moore & Lee, LLP, McLean, VA, for plaintiff.

Devin A. Wolak, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC, for defendant.

OPINION and ORDER

Block, Judge.

The Federal Bureau of Prisons ("FBOP" or the "Bureau of Prisons") contracted to have plaintiff design and build a federal correctional institution in the state of New Hampshire. The New Hampshire state government proved resistant to plaintiff's efforts to fulfill the contract. To satisfy state officials, plaintiff was forced to incur costs it did not expect. Understandably miffed, plaintiff sued its contract partner, the United States. The United States, in turn, filed a motion to dismiss for failure to state a claim upon which relief may be granted. See Rule 12(b)(6), Rules of the United States Court of Federal Claims ("RCFC"). That motion is now before the court.

The central problem in this case may be summarized in a word: risk. Specifically, how does a contract allocate risk when performance is frustrated by the actions of a non-party?

The short answer is that, although the common law permits relief from performance in certain circumstances, how risk is allocated is ultimately up to the parties themselves. See RNJ Interstate Corp. v. United States, 181 F.3d 1329, 1331 (Fed. Cir. 1999) ("[T]he common law doctrine is a default and does not apply where the parties have agreed, by the terms of their contract, to a different allocation of risks."); 30 Samuel Williston & Richard A. Lord, A Treatise on the Law of Contracts § 77:54 (4th ed. 2012) ("Although a party can obtain relief . . . performance has become impracticable, a sine qua non is that performance must have been rendered impracticable . . . without an assumption of risk by the party seeking relief."). Eachparty here claims that the other party assumed the risk of the costs imposed by the New Hampshire state officials.

Defendant argues that it was plaintiff who bore the risk because a provision of the contract assigned "[t]he Contractor" the responsibility of complying with all state laws, regulations, and permitting requirements "without additional expense to the Government." 48 C.F.R. ("FAR") § 52.236-7. Plaintiff argues, however, that defendant had a duty to intercede on plaintiff's behalf when the state of New Hampshire's interference became onerous. Because defendant did not follow through on this duty to intercede, plaintiff argues, it should bear the costs imposed by New Hampshire's alleged meddling—notwithstanding the contract's apparent allocation of responsibility for complying with state law to plaintiff.

In addressing the burden of risk, the court must keep in mind the standards that govern a RCFC 12(b)(6) motion. Specifically, it is plaintiff's responsibility to point out what contractual term or terms, express or implied, gave rise to defendant's alleged "duty to intercede"—and to set forth well-pleaded facts which, if true, would entitle plaintiff to relief. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).

As the court will explain below, plaintiff has failed to identify any contractual basis for concluding that defendant bore the risk of additional costs of complying with New Hampshire law. Indeed, the contract rather clearly allocates that risk to plaintiff, and does so "without additional expense to the Government." Accordingly, for the reasons stated below, the court will grant defendant's motion to dismiss.

I. Facts

A. The Contract

In April 2006, the Bureau of Prisons issued a solicitation for the "design-build" construction of a federal correctional institution known as FCI Berlin, to be located in Berlin, New Hampshire. On or about May 2, 2007, plaintiff was awarded the contract to design and build FCI Berlin for a base sum of $238,175,000. Compl. ¶ 5.

Although neither party has provided the court with a copy of the complete contract, plaintiff alleges (and defendant does not deny) that the contract set forth a schedule for completion. According to plaintiff, the contract provided that FCI Berlin was to be completed 1,120 calendar days after FBOP issued a Notice to Proceed ("NTP"). Compl. ¶ 6. The NTP was issued effective May 16, 2007, thus fixing June 10, 2010 as the Final Completion date. Compl. ¶ 6. The contract also required "Substantial Completion" of FCI Berlin 90 days prior to Final Completion. Compl. ¶ 7. If plaintiff failed to complete the work within the agreed timeframe, FBOP was entitled to assess liquidated damages of $8,000 for every day completion was overdue. Compl. ¶ 8.

In addition to providing a timeframe for completion, the contract contemplated that the design and construction of FCI Berlin would require obtaining certain permits from the state of New Hampshire, as well as complying with various state laws and regulations. In recognition of this fact, the contract contains several terms allocating risks and responsibilities associated with obtaining those permits and complying with those laws and regulations. Defendant has helpfullysupplied excerpts of these provisions, and plaintiff does not deny that the excerpts are genuine and complete.

For example, the contract sets forth a series of "Technical Design Guidelines" ("TDG"), one of which provides "guidance to ensure that the Contractor obtains, reads, and complies with the terms and conditions of applicable permits, construction regulations, and building codes and standards." Def.'s Mot. Ex. A6 ("TDG Section 01415"). Within TDG Section 01415 is a provision entitled "STATE AND LOCAL GOVERNMENT CONSULTATION, REVIEW AND INSPECTION." TDG Section 01415(D)(1). It delineates several duties plaintiff ("the Contractor") was to perform "in conjunction with" FBOP. Those duties included consulting with state officials in "preparing the design for the project," allowing inspections by state officials, and giving "due consideration to . . . recommendations" made by state officials. Another provision within TDG Section 01415, entitled "PERMITS," assigned plaintiff the responsibility for "identify[ing] all permits, licenses, registrations, or certificates required for construction," as well as for "comply[ing] with all terms and conditions of permits, licenses, registration, and certificates." TDG Section 01415(F)(1).

In addition to these duties, incorporated by reference were several provisions of the Federal Acquisition Regulations (the "FAR"). Def.'s Mot. Ex. A1-4. Among the provisions incorporated by reference was FAR § 52.236-7 (the "Permits and Responsibilities Clause"), which provides:

The Contractor shall, without additional expense to the Government, be responsible for obtaining any necessary licenses and permits, and for complying with any Federal, State, and municipal laws, codes, and regulations applicable to the performance of the work. The Contractor shall also be responsible for all damages to persons or property that occur as a result of the Contractor's fault or negligence. The Contractor shall also be responsible for all materials delivered and work performed until completion and acceptance of the entire work, except for any completed unit of work which may have been accepted under the contract.

With these contractual provisions in mind, the court now turns to the facts giving rise to the dispute in this case.

B. The Design and Construction of FCI Berlin

The facts giving rise to the parties' dispute concern the efforts of plaintiff and its subcontractors to comply with New Hampshire state permit requirements, as well as their subsequent efforts to comply with directives of state officials. One of the permits required by the New Hampshire Code of Administrative Rules was an Alteration of Terrain ("AOT") Permit, issued by the New Hampshire Department of Environmental Services ("NHDES"). Compl. ¶ 21. New Hampshire required the AOT Permit because construction of FCI Berlin would entail significant changes to the land. Compl. ¶ 21.

According to the complaint, on July 27, 2007, plaintiff, acting as "agent" for the Bureau of Prisons,¹ submitted an application for an AOT Permit through its subcontractor, Tetra Tech Rizzo. Compl. ¶ 23, Ex. 1; Pl.'s Opp. Ex. 1. Accompanying the application was a "Phasing Plan,"² developed based on information provided in the solicitation documents as well as the experience of plaintiff and its subcontractors. Compl. ¶¶ 24, 25. According to plaintiff, the Phasing Plan allowed for the project to move forward both in accordance with both state regulations and industry standards and in such a manner so as to permit efficient use of cut-to-fill materials. Compl. ¶ 26.

On September 5, 2007, representatives of plaintiff and its subcontractors met with representatives of FBOP and two representatives of NHDES—Ridge Mauck and Denise Frappier. Compl. ¶ 32. Mauck and Frappier advised plaintiff that the AOT Permit would authorize a "disturbance area"³ limited to forty acres. Compl. ¶ 33. On September 10, 2007, NHDES issued the AOT Permit. Compl. ¶ 34. Based on revisions to the Phasing Plan made due to the forty-acre limitation, a revised AOT Permit, authorizing the first phase of construction, was then issued on September 13, 2007. Compl. ¶ 36. The building of FCI Berlin was set to commence.

It was then that the most significant troubles began. In plaintiff's telling, NHDES—and particularly Frappier—"proceeded upon a course of action that devastated efficient and effective performance of the site work." Compl. ¶ 37. For instance, plaintiff alleges that Frappier arrived on site and directed that the area of disturbance be further restricted and that the first phase of construction be divided into two separate operations—one conducted at the ...