Cardiosom, L.L.C. v. United States
| Decision Date | 30 June 2014 |
| Docket Number | No. 08-533C,08-533C |
| Parties | CARDIOSOM, L.L.C., Plaintiff, v. THE UNITED STATES, Defendant. |
| Court | U.S. Claims Court |
Cross-Motions for Summary Judgment; RCFC 56(a); Breach of Contract; Contract Interpretation; Risk-Shifting Contract Language
Jerry Stouck, Washington, D.C., for plaintiff.
Gregg M. Schwind, Senior Trial Counsel, with whom were Stuart F. Delery, Assistant Attorney General; Robert E. Kirschman, Jr., Director; and Steven J. Gillingham, Assistant Director, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, D.C., for defendant.
This is a claim for breach of contract that arises out of the government's termination of plaintiff's contract to supply durable medical equipment to Medicare recipients.2 See Corrected Compl. ¶¶ 22-23, ECF No. 10.
Cardiosom, L.L.C. (plaintiff or Cardiosom) is a Medicare contractor. Centers for Medicare & Medicaid Services (CMS) of the Department of Health & Human Services (defendant or HHS) administers the Medicare program. Effective July 1, 2008, CMS contracted with Cardiosom to provide specified equipment to Medicare beneficiaries.
On July 15, 2008, Congress passed legislation directing HHS to cancel certain contracts, including the subject contract in this action. It is undisputed that defendant terminated plaintiff's contract. What is disputed is whether defendant's termination of plaintiff's contract amounts to a breach.
Defendant argues that certain language in the contract shifted the risk of regulatory change to Cardiosom. Defendant adds that because Cardiosom accepted the risk that its contract could be terminated by a change in the governing statute, it cannot maintain the instant action for breach of contract.
Plaintiff counters that the contract language on which defendant relies states only that plaintiff was required to comply with relevant statutes and regulations. Plaintiff insists that nothing in the referenced contractual language precludes it from maintaining a breach of contract claim. Plaintiff adds that accepting defendant's characterization of the contract language would render the contract illusory because defendant could terminate the contract at will, with no further obligation to plaintiff. Such a reading, plaintiff asserts, must be rejected.
Pending before the court is plaintiff's motion for summary judgment on contract liability, and defendant's cross-motion for summary judgment on contract liability. Both motions are ripe for consideration. Oral argument was neither requested by the parties nor deemed necessary by the court. For the reasons explained below, plaintiff's motion for summary judgment is GRANTED, and defendant's cross-motion for summary judgment is DENIED.
Plaintiff filed this claim on July 22, 2008. Compl., ECF No. 1. On July 24, 2009, plaintiff moved for summary judgment on contract liability. Pl.'s Mot., ECF No. 36. Defendant filed a cross-motion on summary judgment on September 15, 2009. Def.'s Mot., ECF No. 41. Plaintiff and defendant each filed reply briefs. Pl.'s Reply, ECF No. 44. Def.'s Reply, ECF No. 45. In addition, the parties filed a Consolidated Statement of Uncontroverted Facts on November 16, 2009. ECF No. 46 (Fact Stmt.). Plaintiff also filed the declaration of Kevin P. Greisl, President of Cardiosom, which is incorporated by reference in the Consolidated Statement of Uncontroverted Facts. ECF No. 37-1 (GreislDecl.). The contract at issue is included as Exhibit A to the Greisl declaration, and the contract termination letter CMS sent to Cardiosom is included as Exhibit B to the Greisl declaration. Greisl Decl. Exs. A, B.
The facts of this case regarding contract termination are not in dispute. A detailed recitation of these facts has been set forth in previous decisions of both the Federal Circuit and this court. See Cardiosom, L.L.C. v. United States, 656 F.3d 1322 (Fed. Cir. 2011) (), rev'g 91 Fed. Cl. 659 (2010); Cardiosom, L.L.C. v. United States, 115 Fed. Cl. 761 (2014) (). These decisions, however, did not address contract liability. For ease of reference, a brief review of the pertinent facts follows.
In April 2007, CMS issued a final rule establishing a Competitive Acquisition Program (CAP) for the supply of Durable Medical Equipment, Orthotics and Supplies (DMEPOS) to Medicare beneficiaries in specified areas. Fact Stmt. ¶ 2. In July 2007, Cardiosom submitted a bid to CMS for what was known as Round 1 of the CAP. Id. at ¶ 3. On March 21, 2008, CMS notified Cardiosom that it was a successful bidder. Id. at ¶ 4.
Under the terms of the contract, which became effective on July 1, 2008, Cardiosom agreed to provide, on CMS's behalf, oxygen and/or respiratory equipment and supplies in nine different metropolitan areas for a period of three years. Id. at ¶¶ 1, 4. Two weeks later, on July 15, 2008, Congress passed legislation terminating all contracts, that had been issued under the Round 1 contracting process. Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) § 154, 42 U.S.C. § 1395w-3(a)(1) (2012). Plaintiff's contract with CMS was among those terminated. Fact Stmt. ¶ 6.
After filing its complaint in this court in 2008, plaintiff sought damages through an administrative process established by CMS for contractors, like Cardiosom, whose contracts were terminated after the passage of MIPPA. See Pl.'s Second Supp. Br.3 Ex. A, ECF No. 69, at 40-43. Cardiosom received partial payment on its administrative claim. Pl.'s Second Supp. Br. Ex. B, ECF No. 69, at 47.
The Tucker Act confers upon the Court of Federal Claims jurisdiction to "render judgment upon any claim against the United States founded . . . upon any express or implied contract with the United States." 28 U.S.C. § 1491(a)(1)(2012). It does not, however, "create any substantive right enforceable against the United States for money damages." United States v. Testan, 424 U.S. 392, 398 (1976). Instead, the right to money damages must be found in a separate source of law. See Loveladies Harbor, Inc. v. United States, 27 F.3d 1545, 1554 (Fed. Cir. 1994) (en banc). "[I]n a contract case, the money-mandating requirement for Tucker Act jurisdiction normally is satisfied by the presumption that money damages are available for breach of contract, with no further inquiry being necessary." Holmes v. United States, 657 F.3d 1303, 1314 (Fed. Cir. 2011).
Summary judgment is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." RCFC 56(a); see Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). A genuine dispute is one that "may reasonably be resolved in favor of either party." Liberty Lobby, 477 U.S. at 250. A fact is "material" if it "might affect the outcome of the suit." Id. at 248. The moving party carries the burden of establishing its entitlement to summary judgment. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). Once that burden is met, the onus shifts to the non-movant to identify evidence demonstrating a dispute over a material fact that would allow a reasonable finder of fact to rule in its favor. Liberty Lobby, 477 U.S. at 256.
In considering a motion for summary judgment, the court does not weigh each side's evidence but, rather, must draw all inferences in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-88 (1986). Where, as here, the parties have filed cross-motions for summary judgment, the court evaluates each motion on its own merits and makes all reasonable inferences against the party whose motion is under consideration. Marriot Int'l Resorts, L.P. v. United States, 586 F.3d 962, 968-69 (Fed. Cir. 2009). To the extent there exists a genuine issue of material fact, both motions must be denied. Id. at 969.
The "[f]ailure to perform a contractual duty when it is due is a breach of the contract." Winstar Corp. v United States, 64 F.3d 1531, 1545 (Fed. Cir. 1995) (citing Restatement (Second) of Contracts § 235(2) (1981)).
"To recover for breach of contract, a party must allege and establish: (1) a valid contract between the parties, (2) an obligation or duty arising out of the contract, (3) a breach of that duty, and (4) damages caused by the breach." San Carlos Irrigation & Drainage Dist. v. United States, 877 F.2d 957, 959 (Fed. Cir. 1989).
Determining the obligation or duty that arises out of a contract "is a legal question of contract interpretation," id., and contract interpretation is "generally amenable to summary judgment," Varilease Tech. Grp., Inc. v. United States, 289 F.3d 795, 798 (Fed. Cir. 2002). The general rules of contract interpretation apply to contracts into which the government has entered as a party. Lockheed Martin IR Imaging Sys. v. West, 108 F.3d 319, 322 (Fed. Cir. 1997).
It is "a fundamental precept of common law that the intention of the parties to a contract controls its interpretation." Tri-Star Elecs. Int'l, Inc. v. Preci-Dip Durtal SA, 619 F.3d 1364, 1367 (Fed. Cir. 2010) (internal quotation marks omitted); see also Padilla v. United States, 58 Fed. Cl. 585, 591 (2003) (). The intention of the parties is gathered from the four corners of the contract. See Mktg. & Mgmt. Info., Inc. v. United...
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