Case, Inc. v. U.S.
| Decision Date | 28 June 1996 |
| Docket Number | No. 94-5140,94-5140 |
| Citation | 88 F.3d 1004 |
| Parties | 40 Cont.Cas.Fed. (CCH) P 76,945 CASE, INCORPORATED, Plaintiff-Appellant, v. The UNITED STATES, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Federal Circuit |
Marc Lamer, Kostos & Lamer, P.C., Philadelphia, Pennsylvania, argued, for plaintiff-appellant. Of counsel was Fredric T. Rekstis.
Luis M. Matos, Attorney, Commercial Litigation Branch, Civil Division, Department of Justice, Washington, D.C., argued, for defendant-appellee. With him on the brief, were Frank W. Hunger, Assistant Attorney General, David M. Cohen, Director, and Sharon Y. Eubanks, Deputy Director.
Before MAYER, PLAGER and SCHALL, Circuit Judges.
This action arises under the Contract Disputes Act of 1978, as amended ("CDA"), 41 U.S.C. §§ 601-13 (1994). Case, Incorporated ("Case"), appeals the July 5, 1994 order of the United States Court of Federal Claims in Docket No. 92-873 C. In its order, the court dismissed Case's complaint on the ground that the case was "moot" because the "issue presented" had been decided in a related suit, Case, Inc. v. United States, 25 Cl.Ct. 379 (1992). The government defends the court's decision, but also argues that the court was without jurisdiction because the contracting officer lacked authority under the CDA to issue a final decision on the claim in the complaint. For the reasons set forth below, we hold that the Court of Federal Claims properly exercised jurisdiction. On the merits, we affirm.
On October 31, 1986, the Defense Personnel Support Center ("DPSC") awarded Case Contract No. DLA100-87-C033. The contract required Case to manufacture 582,480 pairs of men's fire resistant coveralls. The coveralls were to be woven from Nomex yarn and Case was to deliver 24,020 to 24,340 units per month beginning June 13, 1987. Case was unable to meet the delivery schedule specified in the contract, however, due to a disagreement with the DPSC over the quality standards set forth in the contract specifications. As a result, Case temporarily closed its plant on September 30, 1987. Subsequently, on February 1, 1988, Case and the DPSC agreed to a new delivery schedule in a contract modification. Under the new schedule, Case was required to furnish the DPSC with 20,000 coverall units per month. The modification, No. P00010 ("Mod.10"), stated, "Contractor's delinquency/anticipated delinquency is not excusable." 1
Because Case was a small business, it was allowed to bill the government on a monthly basis for costs incurred in connection with the contract. See 48 C.F.R. §§ 32.502-4(b), 52.232-16 (1986). Under this arrangement, the DPSC paid Case 90% of the amount Case Unfortunately, Case experienced supply problems with Industrion and Dixie. Unknown to Case, Industrion had an outstanding debt to Dixie. Allegedly, Dixie applied the payment it received from Industrion to that debt, and did not supply Industrion with yarn for delivery to Case. Consequently, Case was unable to meet the revised delivery schedule set forth in Mod. 10. Eventually, in October of 1988, Case requested a further revision of the delivery schedule, to 12,800 units per month. However, when the contracting officer asked Case to sign a modification providing for the delivery schedule Case had requested, Case refused to sign until its Industrion/Dixie supply problems were resolved.
billed each month. Case then was to pass this payment on to its supplier, Industrion, Inc. ("Industrion"), which, in turn, was to pay its spinner, Dixie Yarn ("Dixie"). Each month, when finished coveralls were shipped, the government would pay Case the remaining 10 percent due on the monthly payment
Unwilling to accept Case's condition, the contracting officer unilaterally modified the contract on December 21, 1988, in modification No. P00021 ("Mod.21") to impose a new delivery schedule of 12,800 units per month. After Case failed to meet the new delivery schedule, the contracting officer issued a show cause letter on February 3, 1989. After submitting a proposal for contract completion that was unacceptable to the DPSC, Case made no deliveries after April 19, 1989. On July 20, 1989, the contracting officer issued a final decision terminating the contract for default. Shortly thereafter, on August 3, she issued a second final decision in which she demanded from Case the repayment of unliquidated progress payments in the amount of $4,064,212.54, plus interest. 2 The amount sought later was reduced through sales of Case's inventory to $2,806,448.43, plus interest.
In July of 1990, Case brought an action in the Court of Federal Claims under the CDA. 3 Case, Inc. v. United States, 25 Cl.Ct. 379 ("Case I "). As reflected in its amended complaint filed on March 3, 1992, Case challenged the contracting officer's final decision terminating the contract for default, as well as her final decision demanding repayment of unliquidated progress payments. Case alleged that it had "experienced problems in performance resulting from defective specifications," and that "[a]s a result of the Specification problems, Case's performance was delayed causing the finisher of the basic fabric to cancel the order and sell off inventory which it had in its possession and for which it had been paid Progress Payments." Case asserted that the default termination was improper and that the government was not entitled to the return of unliquidated progress payments because the Mod. 21 delivery schedule was not reasonable and because, in any event, the DPSC waived the delivery schedule. On April 6, 1992, the government counterclaimed for return of the unliquidated progress payments.
On September 22, 1992, while Case I still was pending before the Court of Federal Claims, Case submitted a claim to the contracting officer. In its claim, Case asserted that four problems, for which the DPSC allegedly was responsible, had delayed performance of the contract. Specifically, Case alleged that (1) government inspectors had been overly strict in their inspection of the Velcro stitching margin on the coveralls; (2) there was a defect in the coverall pattern in the specifications in connection with the placement of drill holes; (3) the coverall pattern in the specifications was defective in that it called for a "sleeve finishing too large for the armhole opening"; and (4) the coverall pattern in the specifications further was defective because it called for a "collar finishing too small for the opening at the After the contracting officer failed to issue a final decision on Case's claim, Case filed suit in the Court of Federal Claims on December 28, 1992. Case, Inc. v. United States, Docket No. 92-873 ("Case II "). In its suit, Case challenged the contracting officer's deemed denial of its claim for an equitable adjustment and lost profits. 4 Case's challenge to the contracting officer's deemed denial stated that Case had "encountered a number of manufacturing problems related to the Government-provided specifications and patterns, as well as incorrect interpretations thereof by the Government inspectors," and that, as a result, "Case's performance was delayed and disrupted, causing it to incur additional expenses in labor, overhead and related expenses." Case also repeated its claim for lost profits. The trial court suspended proceedings in Case II until Case I was resolved.
back of the garment." Case stated that, "[a]s a result of the foregoing problems [its] performance on the Contract was delayed and disrupted, causing it to incur additional expenses in labor, overhead, and related expenses." Case sought additional compensation in the amount of $1,745,707.55. In addition, it claimed entitlement to $94,966.48 in lost profits, for a total recovery of $1,840,674.03
On July 20, 1993, the government filed a motion for summary judgment in Case I. In support of its motion, the government argued that Case had failed to meet the delivery schedule as originally established, that Case had continued to fail to deliver according to schedule even after the contract was modified, and that the contracting officer correctly determined that Case was unable to demonstrate the financial ability to continue to perform under the contract. On May 23, 1994, the Court of Federal Claims granted the government's motion for summary judgment in Case I. First, the court sustained the termination for default. In so doing, it rejected Case's contention that it suffered detrimental reliance when the government allowed 203 days to elapse between the time Case fell behind on its delivery obligations and the notice of termination of the contract. The court also rejected Case's argument that the government's imposition of the 12,800 units-per-month delivery schedule was unreasonable because Case had failed to locate an alternative source of Nomex yarn.
The court also granted the government summary judgment on its counterclaim. In that regard, the court rejected Case's argument that determination of the final amount it owed the government should await resolution of its claims for an equitable adjustment pending in Case II:
During the early months of the contract, [Case] experienced difficulties in achieving compliance with the contract specifications. Those difficulties, which are now the bases for [Case's] claims for equitable adjustment, were addressed by the parties through bilateral contract modifications issued over the course of several months. Significantly, none of these modifications contain any language either recognizing or preserving a basis for claim in the contractor. To the contrary, the modifications were issued as waivers of contract requirements, with the administrative costs involved being charged to the contractor's account. Plainly, then, these modifications were executed on the premise that the government's waiver of its specification requirements was not an acknowledgment of Government liability but rather...
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