Lear Siegler Services, Inc. v. Rumsfeld
Decision Date | 28 July 2006 |
Docket Number | No. 06-1080.,06-1080. |
Citation | 457 F.3d 1262 |
Parties | LEAR SIEGLER SERVICES, INC., Appellant, v. Donald H. RUMSFELD, Secretary of Defense, Appellee. |
Court | U.S. Court of Appeals — Federal Circuit |
Daniel B. Abrahams, Epstein Becker & Green, P.C, of Washington, DC, argued for appellant. With him on the brief was Shlomo D. Katz.
Maria T. Conneely, Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for appellee. With her on the brief were Peter D. Keisler, Assistant Attorney General; David M. Cohen, Director; and James M. Kinsella, Deputy Director. Of counsel on the brief was John T. Lauro, Department of the Air Force, Air Force Legal Services Agency, of Arlington, Virginia.
Terry R. Yellig, Sherman, Dunn, Cohen, Leifer & Yellig, P.C., of Washington, DC, for amicus curiae International Association of Machinists and Aerospace Workers, AFL-CIO.
Mark D. Colley, Holland & Knight LLP, of Washington, DC, for amicus curiae Professional Services Council. With him on the brief were David P. Metzger, Kara L. Daniels, and Eric L. Yeo.
Before, NEWMAN, GAJARSA, and LINN, Circuit Judges.
Lear Siegler Services, Inc. ("LSI" or "the contractor") appeals from the decision of the Armed Services Board of Contract Appeals ("Board"), granting summary judgment to the government and denying summary judgment to LSI. Lear Siegler Servs., Inc., 2005 WL 852139, 2005 ASBCA LEXIS 31, 2005-1 B.C.A. (CCH) P32,937, ASBCA No. 54449, aff'd on reconsideration, 2005 WL 2716494, 2005 ASBCA LEXIS 90, 2005-2 B.C.A. (CCH) P33,110. LSI had claimed that the Price Adjustment Clause (part of the regulatory scheme of the Service Contract Act of 1965) required the government to compensate LSI for increases in the cost of providing its employees with a defined-benefit health plan, as required by the terms of a collective bargaining agreement ("CBA"). See Service Contract Act of 1965, ch. 286, Pub.L. No. 89-286, 79 Stat. 1034 ( ); 48 C.F.R. § 52.222-43 ("Price Adjustment Clause"). LSI timely appealed.
The Board had jurisdiction pursuant to the Contract Disputes Act, 41 U.S.C. § 607(d)(2), and we have jurisdiction pursuant to 28 U.S.C. § 1295(a)(10) and 41 U.S.C. § 607(g)(1)(A). For the reasons discussed below, we hold that the Board erred in granting summary judgment in favor of the government, and it abused its discretion in denying summary judgment to LSI. Accordingly, we reverse.
The Air Force awarded a firm, fixed price contract to LSI, under which LSI was to provide aircraft maintenance services at Sheppard Air Force Base, Texas. The base year of the contract ran from October 2001 to October 2002, with multiple renewal options thereafter. LSI's predecessor contractor was Lockheed Martin.
LSI's contract incorporated the terms of the Service Contract Act ("SCA"), which serves generally to protect the wages and fringe benefits of service workers. The contract included both a SCA wage/benefit determination, which incorporated the wages and fringe benefits set forth in the CBA between the Air Force and Lockheed's predecessor, and a Price Adjustment Clause, which required the government to pay LSI for "increase[s] ... in applicable ... fringe benefits ... made to comply with ... [the] wage determination ...." 48 C.F.R. § 52.222-43.
LSI's CBA specifically required it to provide its employees with a defined-benefit health plan. As distinct from a defined-contribution plan, a defined-benefit plan obligates an employer to spend whatever is necessary to continue to provide its employees with an agreed-upon level of benefit. A defined-benefit plan thereby ensures that employees will continue to receive the same level of benefit (here health coverage), even as costs rise. Although the future costs of providing benefits under a defined-benefit plan are not known with certainty at the time of contracting, such costs may reasonably be projected on the basis of actuarial determinations.
In February, 2003, LSI submitted a request for a price adjustment under the SCA Price Adjustment Clause for Option Year 2003, seeking reimbursement for the increased costs of providing its employees with the defined-benefit health plan. The Air Force denied the request, and LSI appealed to the Board. The Board distinguished between increases in an employer's costs of providing benefits, which it deemed insufficient to trigger the Price Adjustment Clause, and increases in the benefits themselves. See 48 C.F.R. § 52.222-43(d) ( ).
Observing that there had been no "change in the CBA . . . [or the] scope of benefits to be provided," it concluded that the CBA-based wage determination did not require LSI to incur the increased cost of maintaining the defined level of health benefit, and that the Price Adjustment Clause was therefore inapplicable. Accordingly, the Board granted summary judgment in favor of the Air Force and denied LSI's request for the same. The Board also rejected LSI's course-of-dealing argument, holding that a course of dealing cannot alter the meaning of an unambiguous contract term. LSI timely appealed to this court, and we have jurisdiction pursuant to 28 U.S.C. § 1295(a)(10) and 41 U.S.C. § 607(g)(1)(A).
The principal issue on appeal is whether the Board erred in its construction of the Price Adjustment Clause. For the reasons discussed below, we conclude that it did commit legal error in its determination, and we reverse the judgment of the Board without needing to reach the merits of LSI's other arguments.
This case requires us to review the Board's construction of the Price Adjustment Clause. Our standard of review is governed by the Contracts Disputes Act, which provides that "the decision of the agency board on any question of law shall not be final or conclusive ...." 41 U.S.C § 609(b). Statutory and regulatory constructions are questions of law, which we review de novo. The interpretation of a government contract is also question of law, which we review de novo on appeal. Forman v. United States, 329 F.3d 837, 841 (Fed.Cir.2003). Nonetheless, we give the Board's legal conclusions "careful consideration due to the board's considerable experience in construing government contracts." Wickham Contracting Co. v. Fischer, 12 F.3d 1574, 1577 (Fed.Cir.1994). See also Titan Corp. v. West, 129 F.3d 1479, 1481 (Fed.Cir.1997) (); Erickson Air Crane Co. v. United States, 731 F.2d 810, 814 (Fed.Cir.1984) ().
Summary judgment is properly granted only when there is no genuine issue of material fact. Fed.R.Civ.P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). While we review de novo a district court's grant of summary judgment, we review its denial of summary judgment for abuse of discretion. Pickholtz v. Rainbow Techs., 284 F.3d 1365, 1371 (Fed.Cir.2002).
The SCA requires most government service contracts to contain clauses that protect workers' wages and fringe benefits. See 41 U.S.C. § 351(a). More specifically, the SCA directs the Secretary of Labor ("Secretary") to issue special minimum wage orders, called "wage determinations," for each class of service worker employed in a particular locality, and it forbids contractors (that is, employers) from paying less than the Secretary's wage determinations. See 41 U.S.C. § 351(a)(1). A similar SCA provision applies to fringe benefits. See 41 U.S.C. § 351(a)(2).
In this manner, the SCA prevents contractors from underbidding each other (and hence being awarded government contracts) by cutting wages or fringe benefits to its service workers:
Since labor costs are the predominant factor in most service contracts, the odds on making a successful low bid for a contract are heavily stacked in favor of the contractor paying the lowest wages. Contractors who wish to maintain an enlightened wage policy may find it almost impossible to compete for Government service contracts with those who pay wages to their employees at or below the subsistence level. When a Government contract is awarded to a service contractor with low wage standards, the Government is in effect subsidizing subminimum wages.
Fort Hood Barbers Ass'n v. Herman, 137 F.3d 302, 309 (5th Cir.1998) (citing H.R.Rep. No. 89-948, at 2-3 (1965); S.Rep. No. 89-798, at 3-4 (1965), reprinted in 1965 U.S.C.C.A.N. 3737, 3739).
Although the SCA, as originally enacted, worked well to prevent the depression of wages/benefits (by using wage determinations to set a wage/benefit "floor"), it did not provide a mechanism to prevent the erosion of wage/benefit gains made through collective bargaining, wherein labor groups had succeeded in negotiating wages/benefits that were higher than the Secretary's general wage determination. As the Fifth Circuit aptly noted:
[T]he nature of government contracting, calling for frequent rebidding, combined with the SCA's sole emphasis and reliance on the prevailing wage rate scheme, effectively diminished the bargaining power of unionized workforces. A contractor without a CBA covering its employees, or with a CBA setting comparatively low wage and benefit rates, was able to easily outbid an incumbent contractor bound by a CBA with higher wages and rates that would survive the commencement date of the new contract.
Consequently, the SCA was amended to insert the so-called "successor contractor rule," which prohibits a successor contractor from paying its employees less than its predecessor had paid...
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