Breda Transp. v. Wash. Metro. Area Transit Auth., CIV. A. PJM 01-551.

• Decision Date: 30 August 2001
• Docket Number: No. CIV. A. PJM 01-551.,CIV. A. PJM 01-551.
• Citation: 164 F.Supp.2d 677
• Parties: BREDA TRANSPORTATION, INC., Plaintiff, v. WASHINGTON METROPOLITAN AREA TRANSIT AUTHORITY, Defendant.
• Court: U.S. District Court — District of Maryland

164 F.Supp.2d 677

BREDA TRANSPORTATION, INC., Plaintiff, v. WASHINGTON METROPOLITAN AREA TRANSIT AUTHORITY, Defendant.

No. CIV. A. PJM 01-551.

United States District Court, D. Maryland.

August 30, 2001.

John H. Korns, Esquire, Paul M. Laurenza, Esquire, Oppenheimer Wolff & Donnelly, Mary Margaret Utterback, Esquire, Thelen Reid & Priest, Washington, D.C., for Plaintiffs.

Thomas B. Dorrier, Esquire, Donald A. Laffert, Esquire, WMATA, Washington, D.C., for Defendants.

OPINION

MESSITTE, District Judge.

The Court considers whether the present dispute involving a government procurement contract belongs in this Court or whether it should be heard by the Armed Services Board of Contract Appeals ("Board"). Plaintiff Breda Transportation, Inc. ("Breda") has filed a Motion for Partial Summary Judgment arguing that the case is properly before this Court. Defendant Washington Metropolitan Area Transit Authority ("WMATA") has filed a Motion to Dismiss or, in the alternative, for Summary Judgment, contending that the Board should hear the case. For reasons the Court now undertakes to explain, it will GRANT WMATA's Motion to Dismiss and DENY Breda's Motion for Partial Summary Judgment.¹

I.

Breda is a Delaware corporation headquartered in New York. Among other things, it assembles and rehabilitates subway cars and other transit vehicles. WMATA is the interstate compact agency of the District of Columbia, Maryland and Virginia responsible for the operation and construction of the public transit system in the metropolitan Washington, D.C. area.

On or about September 18, 1992, Breda entered into a contract ("Contract") with WMATA to install new "A/C drive traction" motors in WMATA's metro cars, presumably taking possession of the cars for purposes of installation. Between October 1994 and November 1996, Breda delivered the rehabilitated cars and, in June 1998, WMATA informed Breda that the motors had passed reliability testing. During the winter of 1999-2000, however, the cars began to repeatedly fail. Accordingly, by letters dated March 13 and April 19, 2000, WMATA notified Breda that a latent defect existed and requested a plan of action to address it. Breda apparently did little or nothing to assuage WMATA's concerns. As a result, in October of 2000, WMATA's Contracting Officer issued a "Final Decision" that the motors contained a latent defect which had caused the failure of their electrical system and that Breda had neither corrected the defect nor provided any plan of corrective action. Based on this decision, WMATA informed Breda that it was revoking its acceptance of the transit cars and that it would repair all the motors and charge Breda for the cost of the repairs — estimated to be $13 million. WMATA also advised Breda that, pursuant to the Disputes Article of the Contract, any appeal of its decision would be heard by the Board.

In November 2000, Breda appealed the Contracting Officer's Final Decision to the Board, reserving, however, its objection to the Board's jurisdiction.² In February 2001, Breda filed a complaint for declaratory and injunctive relief in this Court, accompanied by a motion for preliminary injunction seeking to enjoin the proceedings before the Board on the grounds that the Board lacked jurisdiction over the dispute. The jurisdictional issue now comes before the Court on the parties' cross-motions for summary relief.

II.

For purposes of determining jurisdictional questions, the Court is the finder of jurisdictional facts. See Adams v. Bain, 697 F.2d 1213, 1219 (4th Cir.1982). Whether the Board, as opposed to the Court, has jurisdiction over this dispute in the first instance is essentially a question of contract interpretation. See United States v. Utah Const. & Mining Co., 384 U.S. 394, 404, 86 S.Ct. 1545, 16 L.Ed.2d 642 (1965) (determining that the scope of administrative tribunal's jurisdiction is based on "longstanding judicial and administrative construction of the disputes clause"); Norair Eng'g Corp. v. WMATA, 33 F.Supp.2d 422, 425 (D.Md.1998). If the Contract gives the Board jurisdiction, Breda will be required to exhaust its remedies there before coming to Court. See Utah Construction, 384 U.S. at 402, 86 S.Ct. 1545. If the Contract does not give the Board jurisdiction, Breda is entitled to a trial de novo here. Id. at 404, 86 S.Ct. 1545.

The Contract between Breda and WMATA is a standard supply and service contract containing forty-six Articles, including a Disputes Article which establishes procedures for the administrative resolution of disputes before WMATA's Contracting Officer. Pursuant to that Article, the Contractor may appeal the Contracting Officer's decision to the Board which, as indicated, has been designated by WMATA's Board of Directors as its authorized representative under the Contract.³ The Board's decision is "final and conclusive unless determined by a court of competent jurisdiction to have been fraudulent, or capricious, or arbitrary, or so grossly erroneous as necessarily to imply bad faith, or is not supported by substantial evidence." (Contract § 1, Art. 11.)

Not every dispute under the Contract, however, goes before the Board based on the Disputes Article. As well-established law makes clear, some other provision of the Contract must commit the dispute to administrative resolution before the Board is authorized to act. See Utah Construction, 384 U.S. at 404-5, 86 S.Ct. 1545. As the Fourth Circuit has held:

[A]dministrative resolution of a given claim is only authorized if some other provision of the contract establishes an administrative remedy sufficient to afford full relief for the claim. Thus a Disputes clause is best understood as merely establishing an administrative procedure for resolving quarrels. Other contractual provisions, by granting a contract administrator authority to afford some remedy for the quarrel, must in effect confer jurisdiction.

WMATA v. Buchart-Horn, Inc., 886 F.2d 733, 735 (4th Cir.1989).

On that much the parties agree. They also agree that resolution of their jurisdictional dispute involves Paragraph (b) of the Inspections Article of the Contract as well as Subparagraphs (b)(1) and (b)(2). The Court considers the language of that key section⁴:

b. In case any supplies or lots of supplies are defective in material or workmanship or otherwise not in conformity with the requirements of this Contract, the Authority shall have the right either to reject them (with or without instruction as to their disposition) or to require their correction. Supplies or lots of supplies which have been rejected or required to be corrected shall be removed or, if permitted or required by the Contracting Officer, corrected in place by and at the expense of the Contractor promptly after notice, and shall not thereafter be tendered for acceptance unless the former rejection or requirement of correction is disclosed. If the Contractor fails promptly to remove such supplies or lots of supplies which are required to be removed or promptly to replace or correct such supplies or lots of supplies, the Authority may either:

1. By contract or otherwise replace or correct such supplies and charge to the Contractor the cost occasioned the Authority thereby; or

2. Terminate this Contract for default as provided in the DEFAULT article of this Contract. Unless the Contractor corrects or replaces such supplies within the delivery schedule, the Contracting Officer may require the delivery of such supplies at a reduction in price which is equitable under the circumstances. Failure to agree to such reduction of price shall be a dispute concerning a question of fact within the meaning of the DISPUTES article of this Contract.

III.

Breda reads Subparagraphs (b)(1) and (b)(2) of the Inspections Article as providing WMATA with three options in the event Breda fails to promptly correct the defective parts after receiving notice from WMATA. First, under (b)(1), WMATA may "[b]y contract or otherwise replace or correct [the defective parts] and charge to [Breda] the cost occasioned the Authority thereby." Second, under (b)(2), WMATA may "terminate ... for default as provided in the DEFAULT article of this Contract." Third, under (b)(2), WMATA may "require the delivery of the defective parts at a reduction in price which is equitable under the circumstances."

Of these three, Breda argues that only (b)(1) applies. According to Breda, WMATA's revocation of its acceptance of delivery, plus its decision to correct the allegedly defective motors, plus its attempt to charge Breda the cost of that correction, combine to bring that Subparagraph into play. In consequence, Breda says, because (b)(1) does not expressly invoke the Disputes Article, jurisdiction lies not with the Board but with this Court. Breda submits that (b)(2), which contains the Inspections Article's only reference to the Disputes Article and constitutes an alternative to (b)(1), is not implicated in the present case. That Subparagraph, Breda argues, confers jurisdiction on the Board only when WMATA accepts delivery of defective or noncomplying supplies, when it does not require their correction, and when it seeks an equitable reduction in price.

Breda contends that the concept of an equitable reduction in price in (b)(2) is distinct from the cost of repair in (b)(1). It argues that an "equitable reduction in price" is identical to an "equitable price adjustment," a term of art that Breda argues is measured not by the cost incurred by WMATA in making the repairs, but by the altered cost position of Breda. See General Ry. Signal Co. v. WMATA, 875 F.2d 320, 324 (D.C.Cir.1989) ("The term `equitable adjustment' is a legal term of art ... [t]he proper measure of the adjustment is `the difference between what it would have cost to perform the work as originally required and what it cost to perform the work as changed.'") (citation omitted). To the extent WMATA has decided to repair the motors and has...