Sternberger v. United States

• Decision Date: 18 October 1968
• Docket Number: No. 223-60.,223-60.
• Citation: 401 F.2d 1012,185 Ct. Cl. 528
• Parties: Joseph STERNBERGER, Trustee in Bankruptcy for Spenco, Inc. v. The UNITED STATES.
• Court: U.S. Claims Court

185 Ct. Cl. 528, 401 F.2d 1012 (1968)

Joseph STERNBERGER, Trustee in Bankruptcy for Spenco, Inc. v. The UNITED STATES.

No. 223-60.

United States Court of Claims.

October 18, 1968.

Frederick D. Sarkis, Philadelphia, Pa., attorney of record, for plaintiff.

Edward Weintraub, Washington, D. C., with whom was Asst. Atty. Gen. Edwin L. Weisl, Jr., for defendant.

Before COWEN, Chief Judge, and LARAMORE, DURFEE, DAVIS, COLLINS, SKELTON, and NICHOLS, Judges.

OPINION

PER CURIAM:

This case was referred to Trial Commissioner David Schwartz with directions to make findings of fact and recommendation for conclusions of law under the order of reference and the rules of the court. The commissioner has done so in an opinion and report filed August 16, 1968, on plaintiff's assignment of errors, under Rule 99(c).^* Plaintiff has filed no exceptions to or brief on this report and the time for so filing pursuant to the rules of the court has expired. Since the court agrees with the commissioner's opinion, in which necessary facts and recommended conclusion of law are stated, as hereinafter set forth, it hereby adopts the same as the basis for its judgment in this case, without oral argument. Therefore, plaintiff's assignment of errors by the Board of Contract Appeals is denied, plaintiff is not entitled to recover and the petition is dismissed.

OPINION OF COMMISSIONER

SCHWARTZ, Commissioner:

The plaintiff is by suit in this court for breach of contract in effect seeking review of the decision of the Armed Services Board of Contract Appeals awarding him $5,161.88 on his claims for some $60,000 under a standard disputes clause in plaintiff's 1955 contract with the Navy. (The contractor-claimant before the Board will be treated interchangeably with its trustee in bankruptcy, the substituted plaintiff.) Plaintiff's assignment of errors by the Board is in substance a motion for summary judgment under Rules 94-100, and this opinion reports determinations and conclusions of law pursuant to Rule 99(c).

The contract was one for the production of a quantity of gun chargers and extra parts, at a fixed price of $83,510.91. Plaintiff sought costs attributable to a partial termination for the convenience of the government; costs of delays from alleged double inspection by the government, said to be a change under the changes clause; costs of allegedly improper inspection and rejections; and finally, costs of extras arising out of changes in the specifications. The Board held claimant entitled to an equitable adjustment of $232.83 on the claim for costs resulting from partial termination for convenience by reason of the government's failure to order the spare parts contemplated by the contract, and an equitable adjustment of $4,929.05 for the remaining claimed costs and extras.

The questions in dispute in this court concern only the amount of the awards. The contention, presented by plaintiff's assignment of errors committed by the Board, is that the Board decision is not supported by substantial evidence and thus not entitled to finality under the Wunderlich Act, 41 U.S.C. § 321. Plaintiff prays that the Board decision be held not binding, that the claims to costs in addition to those awarded be upheld, and that the case be remanded to the Board for negotiation of damages.

The first challenge to the Board's decision is based on the omission of the government to present any witnesses on the issues of damages. The plaintiff urges that its evidence of damages and its claim for $60,000 were thus uncontroverted, and that the award may therefore not vary materially from the amount of the claim.

Plaintiff took the position, before the Board, that it could not show precisely the costs incurred as the result of the several government actions complained of, and it thus sought what it termed a "jury verdict" by the Board upholding a claim for the total costs of the alleged combined government delays and extras. Plaintiff's evidence primarily took the form of an overall presentation, primarily presented through an expert witness, of what its costs should have been and what they actually were. The entire difference of $60,000 between estimated and actual costs (both estimates) was attributed to the government's termination, delays, changes and extras. Plaintiff has thus combined the "jury verdict" approach to damages with the "total cost" method for the determination of damages, both discussed recently by this court in WRB Corporation et al. v. United States, 183 Ct.Cl. 409, 425-426 (1968).

Both "jury verdict" and "total cost" standards are not favored, and are permitted to be used to compute damages only upon strict conditions, recently stated by the court in WRB Corporation et al., supra. Some of these conditions are that the nature of the losses must be such that they cannot be determined with reasonable accuracy; that a showing must be made that the bid — the basis for the estimate of what costs should have been — was realistic; that the actual costs must be reasonable; and, finally, that the additional costs must be attributable only to the government's changes and delays. These conditions are no more than just if the contractor is to meet his "essential burden of establishing the fundamental facts of liability, causation, and resultant injury." Wunderlich Contracting Co. v. United States, 351 F.2d 956, 968, 173 Ct.Cl. 180, 199 (1965).

Little if any effort was made to meet these conditions, and such testimony as was given does not meet any of them. The Board justifiably found fault with such evidence as was presented.

Proof of damages or costs was made by testimony of the president of the contractor at the time of performance of the contract, by testimony of the mentioned expert on damages and by a "Summary of Claim" prepared by a certified public accountant.

The president's testimony was general and imprecise. Where it verged on the specific it was in response to leading questions, and entitled to and given little weight.

The expert, an industrial consultant who had made a study of the contractor's costs and operations, testified at some length. He identified various exhibits and schedules embodying his analyses of costs, as the basis for his various intermediate and ultimate conclusions. He had, he said, relied upon records of the company, conversations with the president of the company, figures he had received from others as derived from the books, and on his own experience and background. He had relied, at least in part, on correspondence files which were not part of the record, on the experience of the president and others not named, on various estimates, and on "the experience of the people who made the estimate, which includes myself." He identified work papers as prepared by him but "not necessarily" in his writing. He had included a profit figure of 12 percent "mainly because the president had established this in some little document I had seen somewhere relative to this case." Some of his exhibits, as will appear below in discussions of individual awards, contained errors in arithmetic and errors in their summary of the underlying data. In one case, the underlying data was directly contrary to the point made in his summary. In others, increases in cost for a small number of the required parts were assumed to be an increase for every such part. The Board found his testimony "so inaccurate and so grossly exaggerated as to make it unreliable."

The "Summary of Claim" by the accountant served primarily to detract from the expert's testimony. It could not offer any basis for an award in the amount it claimed, for it was brief, undocumented, and conclusory rather than explanatory. Its author did not testify and it appeared that he had apparently proceeded on theories quite different from those of the expert. One example relates to "captive plant loss," for which the accountant's report claimed $21,067.17. The expert made no such claim. "Captive plant loss" was composed in part of overhead, and yet the accountant's report also claimed overhead and costs of administration as such. Another example has to do with an element of overhead, according to the accountant, of several thousand dollars "for authorized but undrawn salary" of plaintiff's president. No such item appears in the expert's estimates.

Although the expert testified that he was in part relying on the accountant's report, the two differed in their computations of the same item. The accountant's summary claimed that contemplated labor costs were $8,600, while the expert testified that they were $5,550.12. Actual labor costs over 29 months were given as $11,579.15 by the accountant, while the expert gave them as a lesser sum — $11,075.37 — over a period of 30 months. Their choice of slightly different periods in which labor was expended on the contract in question is another point of variation. Extra costs for parts required by the government's changes were stated to be $137.45 by the accountant, and by the expert's testimony were either $2,846.40 or nothing.

The greatest difference between the two was in their overall conclusion. The accountant's "Summary of Claim" gave the total claim as $29,710.39. The expert estimated the contractor's actual costs to have been $102,700.34 and his estimated costs to have been $57,159.63. Though the difference between these actual and estimated costs is $45,540.71, the witness' opinion and testimony was that the costs attributable to the government's delays and changes were "something between $50,000 and $60,000."

The Board in its opinion noted some of these and other defects and contradictions in the testimony. It considered a remand for negotiation of damages, and, if negotiation failed, the presentation of more relevant evidence, but it concluded that the parties were unlikely to agree and it doubted that more relevant evidence could be presented. It concluded that the contractor had in large part not linked proof of costs or...