Chapman Law Firm, LPA v. United States
| Decision Date | 25 November 2013 |
| Docket Number | No. 09-891C,09-891C |
| Parties | CHAPMAN LAW FIRM, LPA, Plaintiff, v. UNITED STATES, Defendant. |
| Court | U.S. Claims Court |
Trial; Contract Disputes Act;
Special Plea in Fraud;
Forfeiture; False Claims Act;
Spoliation.
James S. DelSordo, Argus Legal, LLC, Manassas, Va., for plaintiff.
Lauren S. Moore, Trial Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, D.C., for defendant. With her were Gregg M. Schwind, Senior Trial Counsel, Patricia M. McCarthy, Assistant Director, Bryant G. Snee, Acting Director, Commercial Litigation Branch, Stuart F. Delery, Assistant Attorney General, Civil Division, Washington, D.C., and Patricia McGarvey Knebels, of counsel, United States Department of Housing and Urban Development, Philadelphia, Pa.
Plaintiff, Chapman Law Firm, LPA, asserts three claims1 against defendant arising from plaintiff's contract with the Department of Housing and Urban Development (HUD) to provide management and marketing services for single-family homes in Ohio and Michigan. Plaintiff seeks compensation for: (1) costs that plaintiff incurred during two stop work order periods issued in response to bid protests filed at the United States Government Accountability Office (GAO), (2) costs that plaintiff incurred as a result of constructive changes to the parties' contract, and (3) what appear to be lost profits resulting from defendant's alleged bad faith failure to exercise the first option year to the parties' contract. In response, defendant asserts a counterclaim under the False Claims Act, 31 U.S.C. § 3729 (2006), as well as a number of affirmative defenses. Defendantmaintains that plaintiff violated the False Claims Act by submitting thirteen invoices2 to the HUD contracting officer, as well as a certified claim, impliedly representing that plaintiff had used licensed inspectors to conduct wood-destroying organisms (WDO) inspections of homes in HUD's inventory, although plaintiff had inspected homes with unlicensed inspectors, and that plaintiff had conducted WDO and routine inspections of homes in the inventory, although the inspections allegedly never occurred.3 Defendantalso argues that plaintiff's claims should be barred, in whole or in part, under the doctrines of material breach of contract, unclean hands, offset, and failure to mitigate damages, as well as under the Special Plea in Fraud statute, 28 U.S.C. § 2514 (2006).4 Plaintiff asserts that defendant's counterclaim is barred by defendant's "own breach of contract," estoppel, accord and satisfaction, and "own lack of reliance on any statement made by CLF."5 Trial was held in two phases, as a result of plaintiff's belated and rolling production of documents, which is described below.
On September 30, 2005, HUD awarded Contract No. C-PHI-00958 (the contract) to plaintiff for the management and marketing of single family homes in Ohio and Michigan. Following a bid protest to the contract award, see Greenleaf Constr. Co., B-293105.18, B-293105.19, 06 CPD ¶ 19 (Comp. Gen. Jan. 17, 2006),6 the original contract was replaced in its entirety by Modification 0003,7 which was issued on December 19, 2006, and became effective on January 1, 2007.8 The contract, as amended, was an indefinite quantity, fixed-unit-rate contract with a total estimated value of $34,745,000.00 for the base period of the contract. Plaintiff was compensated under the contract for each service that it provided to HUD with respect to properties that HUDtransferred to plaintiff's inventory.9 Under the contract, as amended, plaintiff was to provide management and marketing services for the HUD Homeownership Center "Philadelphia B," which corresponded geographically to the states of Ohio and Michigan.
The base period of the contract, as amended, was from January 1, 2007 to December 31, 2007. The contract provided for a transition period, which included a "Start Up" phase, in which plaintiff was to prepare to perform the contract by establishing infrastructure and hiring personnel, as well as a "Ramp Up" phase, in which plaintiff was to receive properties in its inventory until the date on which plaintiff was responsible for fully performing the contract. The contract also included four option years with the potential to extend the contract to December 31, 2011. If defendant intended to extend the contract, defendant was required to give plaintiff a preliminary notice at least sixty days before the contract's expiration, followed by a formal notice at least thirty days before the contract's expiration. See FAR 52.217-9 (2000). The contract, as amended, explicitly stated, however, that "[t]he preliminary notice does not commit the Government to an extension."
Although plaintiff was to begin performance of the original contract on October 1, 2005, a bid protest was filed at the GAO to contest the award of the contract to plaintiff. As a result, the contracting officer stayed plaintiff's performance of the original contract on October 7, 2005. On January 17, 2006, the GAO issued a decision on the bid protest, finding that plaintiff had made material changes to its proposal during the course of the procurement, that a potential conflict of interest was created by Frank Chapman's ownership of plaintiff, his status as plaintiff's Chief Executive Officer, and receipt of a portion of the profits derived from Lakeside Title, which was HUD's closing agent for the state of Ohio, and which Frank Chapman had owned prior to the award of the contract to plaintiff. See Greenleaf Constr. Co., B-293105.18, B-293105.19, 06 CPD ¶ 19. On April 19, 2006, the contracting officer terminated the original contract pursuant to Modification 0001. Although HUD reissued the solicitation,10 plaintiff filed a bid protest at the Court of Federal Claims, see Chapman Law Firm Co. v. United States, 71 Fed. Cl. 124, and the contract with plaintiff was reinstated on June 12, 2006, pursuant to Modification 0002, prior to the completion of the new procurement. Plaintiff submitted a revised proposal on July 13, 2006, which stated that plaintiff did not requirethe "transition time of up to six months," which was provided in the solicitation, because plaintiff did not "require" a transition period and was "prepared to start immediately." Plaintiff submitted a second, revised proposal on November 7, 2006, once again indicating that plaintiff remained "ready, willing and able to immediately commence performance of these services as set forth in the prior and current Requests for Proposals."11
The contracting officer issued Modification 0003 on December 19, 2006, which replaced the original contract in its entirety, effectively resolving the new solicitation in plaintiff's favor. Under Modification 0003, plaintiff's performance of the contract was to begin on January 1, 2007. A second bid protest, however, was filed with the GAO on December 29, 2006 by Greenleaf Construction Company, Inc. See Greenleaf Constr. Co., B-293105.21, B-293105.22, B-293105.23, 07 CPD ¶ 84 (Comp. Gen. Apr. 4, 2007). As a result, the contracting officer once again stayed plaintiff's performance of the contract on January 3, 2007.
On January 3, 2007, while the second bid protest was pending, plaintiff sent the contracting officer a request for an equitable adjustment relating to the first stop work order period in the amount of $1,884,097.65. Plaintiff asserted entitlement to $385,455.48 in rent for the first stop work order period, which included a third of the cost of utilities for the building in which plaintiff's offices were located. Although not noted in plaintiff's request for equitable adjustment, the building in which plaintiff's offices were located was owned by 925 Keynote Circle Corporation, a separate company owned by Frank Chapman, plaintiff's Chief Executive Officer. Plaintiff also asserted entitlement to $245,632.79 for wages paid to its employees. Plaintiff separately asserted entitlement to compensation for "wages which were simply not paid and where the parties agreed to take less money and seek later reimbursement from HUD," including $119,604.97 for the services of Derek Gasiorowski, who was plaintiff's Quality Control Supervisor and Inspections Supervisor during plaintiff's performance of the contract at issue in this case, $80,000.00 for the services of Justin Smith12 during plaintiff's performance of thecontract, $50,000.00 for the services of John Goss, plaintiff's Vice President of Operations and Contract Compliance during plaintiff's performance of the contract, as well as a technology specialist for plaintiff, and $437,500.00 for the services of Frank Chapman. In addition, plaintiff asserted entitlement to compensation for its "reoccurring expenses," such as payments made for telephone lines and office supplies. Plaintiff separately asserted entitlement to compensation for payments made through Frank Chapman's credit card and a checking account in the amount of $320,152.54, which included costs related to maintaining cellular phones and the purchase of gas and supplies by plaintiff's employees. Plaintiff also sought fifteen percent of what it viewed to be recoverable expenses relating to the stop work order period, which plaintiff characterized as "[p]rofit[s]."
In support of its a request for equitable adjustment relating to the first stop work order period, plaintiff submitted four charts delineating expenses that plaintiff allegedly incurred during the first stop work order period, including rent payments, payroll, payments made via check and electronic transfer, and payments made through Frank Chapman's credit card. Plaintiff's supporting documentation also included modified versions of the two charts relating to the payments made via check and electronic transfer and payments made on Frank Chapman's credit card, which highlighted the expenses that plaintiff believed were related to the first stop work...
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