Thompson Ramo Wooldridge Inc. v. United States, 104-64.

• Decision Date: 13 May 1966
• Docket Number: No. 104-64.,104-64.
• Parties: THOMPSON RAMO WOOLDRIDGE INC. v. The UNITED STATES.
• Court: U.S. Claims Court

175 Ct. Cl. 527, 361 F.2d 222 (1966)

THOMPSON RAMO WOOLDRIDGE INC. v. The UNITED STATES.

No. 104-64.

United States Court of Claims.

May 13, 1966.

COPYRIGHT MATERIAL OMITTED

Gilbert A. Cuneo, Washington, D. C., attorney of record, for plaintiff. David V. Anthony, Thomas H. Truitt and Sellers, Conner & Cuneo, Washington, D. C., of counsel.

Edgar H. Twine, Washington, D. C., with whom was Asst. Atty. Gen. John W. Douglas, for defendant.

Before COWEN, Chief Judge, JONES, Senior Judge, and LARAMORE, DAVIS and COLLINS, Judges.

DAVIS, Judge.

Plaintiff seeks an equitable price adjustment under a supply contract with the Department of the Navy, and, alternatively, damages for breach of that contract. The claim is that the defendant breached a contractual warranty requiring it either to furnish microfilm suitable for use in performing or to grant a price increase if suitable microfilm were not supplied.

On May 10, 1957, the Bureau of Ships issued an Invitation for Bids for the production of thirty-six radio transmitters.¹ The bid schedule recited that the defendant would supply the successful bidder with three items of Government-furnished property. These were a prototype radio transmitter, copies of a Navy Technical Manual which described the transmitter, and "one set of Microfilm of Manufacturing Drawings". None of these three items described a transmitter identical to the one to be supplied under the contract. A second provision of the schedule ("Production Equipment") set out several manufacturing standards which the contractor had to meet: — the equipment to be assembled was to conform with certain Bureau of Ships specifications; it was to duplicate, with minor exceptions, the Government-furnished prototype transmitter, as described in the Navy Technical Manual; and it was to be physically, mechanically and electrically interchangeable with corresponding parts and components of the Government-furnished sample transmitter.

Under the Bid Invitation as originally issued, only one item of Government-furnished property — the Navy Technical Manual — was to be made available at the pre-award stage for inspection and consideration by interested contractors. Officers of the plaintiff-corporation² studied this Invitation, but decided (for reasons which are now the subject of sharp dispute) that it would not bid. On May 28, 1957, the Government amended the Invitation for Bids to make the Government-furnished "Microfilm of Manufacturing Drawings" also available during the pre-award period. This apparently revived plaintiff's interest in bidding, and it dispatched an officer to examine a set of the microfilmed drawings. After viewing the microfilm during the allotted three-hour period, this representative reported that "the index of the film appeared to be complete, well-organized, and that the microfilm, as best he could tell from the use of the viewer appeared to be fair."³ Reversing its earlier decision, Thompson Ramo then submitted a bid, and was awarded the contract on June 28, 1957.

As the successful bidder, the plaintiff requested and received the three items of Government-furnished property. It sent the microfilm out to have prints of the manufacturing drawings made which could be utilized in producing the radio transmitters. A large number of the prints turned out to be of poor quality and could not be used. As a result, the plaintiff asked the Government's assistance in obtaining better microfilm, but the defendant was able to replace only a small portion of the defective film. The plaintiff then spent many engineering and technical man-hours retracing drawings which were not adequately reproduced or reproducible, and obtaining missing information by checking the microfilm through a viewer and recording information thus secured on the drawings. In some cases, the Government-furnished sample transmitter was disassembled in order to determine missing measurements, while in others needed details were obtained from the sample by "reverse engineering". By letter of June 28, 1960, Thompson Ramo advised the Government of these difficulties, asserting that the microfilm was "not suitable for the use contemplated by the contract" and that it "had to expend a substantial amount of time and money to make the specifications and drawings workable."⁴ On these grounds, it sought an upward equitable adjustment in the contract price of $265,328.36. The contracting officer denied this claim, and plaintiff appealed to the Armed Services Board of Contract Appeals.

As framed by the parties, the dispute before the Board (as in this court) focused on the meaning and relationship of three contract provisions.⁵ The first, Additional General Provision number 30 (the "AGP" clause) explicitly warranted that the microfilm was fit for its "intended use". It stated in part that "the Government shall deliver to the Contractor * * * the property described in the Schedule or specifications * * *. * * * In the event the Government-furnished Property is received by the Contractor in a condition not suitable for the intended use the Contractor * * shall take certain prescribed steps. Then * * *, the Contracting Officer upon written request of the Contractor shall equitably adjust the delivery or performance dates or the contract price, or both, and any other contractual provision affected by the rejection or disposition * * * of the unsuitable property." Emphasis added.⁶ However, a second article — the "Schedule" clause — after naming the three specific items of property to be furnished by the Government, could possibly be read, on its face, either to limit or disclaim altogether the Government's warranty obligation under the AGP clause.⁷ A third provision ("Order of Precedence") seemed to provide for the resolution of conflicts by stating that "to the extent of any inconsistency between the Schedule and * * * the General Provisions, the Schedule shall control."

The Government denied that the microfilm was unsuitable. But it further argued that even if the property were unsuitable the exculpatory language of the Schedule clause barred recovery through the operation of the Order of Precedence provision. Considering the various sections, the ASBCA found "no real inconsistency" between the AGP clause and the disclaimer language of the Schedule article. It concluded therefore that the Order of Precedence provision was inapplicable. The function of the AGP clause, said the Board, was to spell out a remedy — equitable adjustment — for instances where the Government delivered unsuitable property, without listing the specific property to be furnished or stating its intended use. Conversely, the Schedule clause provided no express remedy, but instead described the particular items the Government was bound to supply and stated the purpose for which it was furnished.⁸ The Board ruled that the Schedule clause did not constitute either a complete or partial disclaimer beyond the reach of the AGP provision, saying: "We believe the two clauses compliment each other. Construing them together we believe they provide for an equitable adjustment in the contract price when the property is not suitable for its intended use." The Board then held that the property was fit for its intended use, since it was "usable and useful" in performing some aspects of the contract, even though it was not suitable for making prints. The production of prints was held not to be an intended use of the microfilm. Plaintiff's claim for an equitable adjustment was therefore denied. 1963 BCA ¶ 3931.

The contractor now challenges the Board's decision under the Wunderlich Act, 41 U.S.C. §§ 321, 322. Only the administrative record is before us. On that record we discuss the three issues which, in our view, control resolution of the dispute. These are whether the disclaimer language in the Schedule clause wiped out, or seriously diminished, the AGP warranty of suitability; whether the making of prints was an "intended use" for which the Government furnished the microfilm; and whether, if so, the microfilm was in fact suitable for that purpose.

I

It cannot seriously be questioned that the AGP provision (supra, fn. 6), standing alone, would give the plaintiff a monetary remedy for the Goverment's failure to furnish suitable microfilm. That is precisely what the clause says and was meant to say. Topkis Bros. Co. v. United States, 297 F.2d 536, 155 Ct.Cl. 648 (1961). The defendant's main position, however, is that the AGP representations as to suitability were negated by the contract's Schedule clause, especially the part which stated (supra, fn. 7):

The Government does not * * * represent that the microfilm is legible in whole or in any particular part or that the drawings from which the microfilm was made, are complete and accurate in all respects or in any particular respect, * * *. Emphasis added.

The Government's argument, plain and simple, is that this provision freed it from all responsibility for the microfilm's condition. It maintains that the quoted language told Thompson Ramo not only that the Bureau of Ships did not warrant the microfilm in its entirety (i. e., 100%), but also that it did not warrant any of the film (not even .01%). We disagree and hold that the Government remained responsible, within limits, for microfilm that was not suitable.

The key to the textual problem is the established canon that contract provisions should not be construed as conflicting unless no other reasonable interpretation is possible. Hol-Gar Mfg. Co. v. United States, 351 F.2d 972, 979, 169 Ct.Cl. 384, 395-396 (1965); 3 Corbin, Contracts § 549 (1960). This is particularly so when the provision sought to be eliminated, or subordinated, is a standard mandatory clause of broad application, like the AGP Government-furnished Property article. Cf. Kaiser Industries Corp. v. United States, 340 F.2d 322, 329-330, 169 Ct.Cl. 310, 323-324 (1965); Fehlhaber Corp. v. United States, 151 F.Supp....