Free Motion to Dismiss - Rule 12(b)(6) - District Court of Federal Claims - federal

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NO. 08-191C (Judge Allegra) IN THE UNITED STATES COURT OF THE FEDERAL CLAIMS

CHENEGA TECHNOLOGY SERVICES CORPORATION, Plaintiff,
V.

THE UNITED STATES, Defendant.

DEFENDANT'S MOTION TO DISMISS OR, IN THE ALTERNATIVE, MOTION FOR SUMMARY JUDGMENT

Respectfully submitted, GI~GORY G. KATSAS Assistant Attorney General JEANNE E. DAVIDSON Director s/Reginald Blades REGINALD BLADES Assistant Director s/Sean M. Dunn SEAN M. DUNN Trial Attorney Commercial Litigation Branch Civil Division Department of Justice Attn: Classification Unit 1100 L Street, N.W., 8th Floor Washington, DC 20530 Tele: (202) 616-0883 Fax: (202) 353-7988

July 18, 2008

Attorneys for Defendant

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TABLE OF CONTENTS DEFENDANT'S MOTION TO DISMISS OR, 1 IN THE ALTERNATIVE, MOTION FOR SUMMARY JUDGMENT .................... QUESTIONS PRESENTED ..................................................... 1

STATEMENT OF THE CASE ................................................... 2 ARGUMENT ................................................................. I. II. Ill. 6

6 Standard Of Review ................................................ 7 Chenega IZd~owingly Rendered Services Without a Contract ................ No Implied-In-Fact Contract Existed Between Chenega And The Government ............................................. 11 12

CONCLUSION ..............................................................

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TABLE OF AUTHORITIES CASES: Anderson v. Liberty Lobby Inc., 477 U.S. 242 (1986) ......................................................
PAGES:

7

Atlas Corp. v. United States. 11 895 F.2d 745,754-55 (Fed. Cir. 1990) ...................................... Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955 (2007) .................................................... 6

Curtis v. United States, 7 144 Ct. C1. 194 (1958) .................................................... Federal Crop. Ins. Corp. v. Merrill, 332 U.S. 380 (1947) ..................................................... 10

Flexflab, L.L.C.v. United States, 424 F.3d 1254 (Fed. Cir. 2005) ............................................. 8 Girling Health Sys. v. United States, 12 949 F.2d 1145 (Fed. Cir. 1991) ........................................... Green v. Mgmt. Corp. v. United States, 42 Fed. C1.411 (1998) .................................................10 8, Hercules Inc. v. United States, 11 516 U.S. 417, 424 (1996) ................................................. Lockheed Martin IR Imaging Sys., Inc. v. United States, 8, 108 F.3d 319 (Fed. Cir. 1997) ........................................... 10 New England Tank Indus. of New Hampshire v. United States, 8 861 F.2d 685 (Fed. Cir. 1989) .............................................. Perez v. United States, 6 156 F.3d 1366 (Fed. Cir. 1998) ............................................. Tellabs, Inc. v. Makor Issues & Rights, Ltd., 127 S. Ct. 2499 (2007) .................................................... 7

Trauma Serv. Group v. United States, 7, 104 F.3d 1321 (Fed. Cir. 1997) .......................................... 11

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS CHENEGA TECHNOLOGY SERVICES ) CORPORATION, ) Plaintiff, v. THE L~ITED STATES, Defendant.

)

) ) ) )

No. 08-191C (Judge Allegra)

)
)

DEFENDANT'S MOTION TO DISMISS OR, IN THE ALTERNATIVE, MOTION FOR SUMMARY JUDGMENT Pursuant to Rule 12(b)(6) of the Rules of the United States Court of Federal Claims ("RCFC"), defendant, the United States, respectfully requests that the Court dismiss the complaint because it fails to state a claim upon which relief can be granted. Chenega Technology Services Corporation ("Chenega") commenced this action seeking payment for services provided to the United States Army (the "Army") from December 9, 2006 tl~'ough June 22, 2007. Because Chenega provided these services to the Army after the expiration of its contract with the Army, however, Chenega's complaint fails to state a clailn upon which relief can be granted. In the alternative, defendant respectfully requests that the Court grant summary judgment in its favor pursuant to RCFC 56. In support of our motion, we rely upon plaintiff's complaint, this brief, the attached appendix and the accompanying Defendant's Proposed Findings of Uncontroverted Fact. QUESTIONS PRESENTED 1. Whether Chenega is entitled to compensation for services rendered beyond the base period of the contract where the Government did not exercise the option to extend the contract in writing.

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2. Whether an implied-in-fact contract existed between Chenega and the Govermnent, despite the fact that the Govermnent did not authorize Chenega's continued performance after the period of performance expired. STATEMENT OF THE CASE On January 28, 2000, the United States Army, Directorate of Contracting at Fort Huachuca, Arizona, awarded Contract No. DABT63-00-D-0001 (the "Contract") to McLean Research Corporation, which, in August 2000, became a component of Chenega. Ex. A. The one-year indefinite delivery/indefinite quantity ("ID/IQ") contract, from which task orders could be issued, specified that, pursuant to Federal Acquisition Regulation ("FAR") Clause 52.217-8" The Government may require continued performance of any services within the limits and at the rates specified in the contract in accordance with 52.217-8 (Section I). The Contracting Officer may exercise the option by written notice to the contractor prior to the expiration of the contract. Id__~. at B-1 (emphasis added). The Contract also contained FAR 52.216-18, which incorporated the terms of the.Contract to all orders issued against the contract. Id__~. at I-8. On November 27, 2000, pursuant to FAR 52.217-9, the Army issued modification P00003 to exercise an option on the Contract, extending it through January 31, 2002. Ex. B (Mods. P00003, P00004). In January 2001, the Army transferred the Contract to the Department of the Interior ("DOI") for administration by National Business Center ("NBC"), DOI's franchise contract management bureau, and the contract number was changed to Contract No. NBCHD010004. Id_~. (Mods. P00007, P00008). On January 22, 2002, NBC issued Modification No. 0010 to exercise the second option period extending performance through January 31, 2003. Id_~. NBC subsequently
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issued Modification No. 0011, exercising the third and fourth option periods, extending performance tl~'ough January 31, 2010. Id__~. In late 2005, the Army issued a statement of work ('°SOW'.') to NBC for teclmical assistance services in support of the Army's Office of the Provost General, Operations Division, Corrections and Internment Branch ("OPG"). Ex. C. The work required a broad range of technical support, analysis, training, and policy development for the Army's correctional system. Id_~. The SOW contemplated one base year, with two oneyear option periods. Id___~. In response to NBC's solicitation for the work, Chenega submitted a time and materials proposal for a task order against the Contract. On December 8, 2005, NBC contracting officer Dean Haskin issued Task Order No. D0100040052 ("TO 0052") to Chenega for the correctional system work sought by the OPG. Ex. D. TO 0052 had a one-year base period for performance, commencing on December 9, 2005 and expiring December 8, 2006. Id__~. Modification 001 was issued in March 2006 to add the two oneyear option periods contemplated in the SOW. Id__:. Option Year 1 was identified to begin December 9, 2006 and expire December 8, 2007. Id__:. On November 20, 2006, the OPG notified NBC of its desire to extend the contract by exercising TO 0052's first option period ("Option Year 1"). Ex. E. The OPG also issued an updated SOW and designated LTC Alexander Conyers as the Contracting Officer's Technical Representative ("COTR"). Ex. F. Mr. Haskin advised the OPG that NBC's normal lead time to exercise an option was 60 days, and he could not guarantee the option would be exercised before the expiration of the base year. Ex. G. Mr. Haskin also requested the OPG expedite the delivery of funds to exercise the option. Id.

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As of December 1, 2006, NBC had not received funding to exercise Option Year 1. Mr. Haskin notified the OPG that, due to the limited time remaining in the base performance period, NBC would not be able to complete the actions necessary "to ensure there is no lapse in service." Ex. H. On December 5, 2006, Chenega's senior contract administrator, Paula Isicson, contacted Mr. Haskin to request "the status of the government issuing a modification to exercise the option to extend the Period of Performance so we can advise our employees as to whether they should report to work after December 8th." Ex. I. After a telephone conversation with Mr. Haskin, Ms. Isicson stated in an e-mail that it was his understanding that because NBC had received funding, "Chenega can continue to work on this task until the modification is issued." Ex. J. Mr. Haskin replied that Chenega's election to continue work beyond the base period of performance, but prior to the written exercise of the option, "should not be a problem," but that because NBC did not receive the funding until five days before the performance end date, he "could not guarantee the action would be completed in time." Ex. K. Brenda Campbell, the NBC Contracting Officer, however, clarified that, until a modification was issued, Chenega would be working at its own risk: Please be advised that anytime a contractor works without the benefit of a signed contract they are working at risk. The Govermnent will not ask or condone a contractor to work at risk. We can exercise an option late as long as there was demonstrated intent to do so. If and when a modification is issued to exercise the option Chenega will be allowed to invoice for services as if there were no break. Ex. L.

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On December 8, 2006, NBC issued Chenega a notice of"Intent to Exercise the Option to Extend the Term of the Contract," which provided, in part:

This letter advises you of our intent to extend the contract and does not in any way commit or obligate the Government. Should the Govermnent extend the term of the contract, a modification will be issued. By acknowledging receipt and acceptance of this notification, the contractor agrees to waive the 60-day notification in FAR 52.217-9. Please return this letter, executed.., if you concur with this.

Ex. M.
Despite Ms. Campbell's warning, after the period of performance for TO 0052 expired on December 8, 2006, Chenega continued working. Mr. Haskin, and his contract specialist Eileen Carter, continued the administrative review necessary to issue the modification to exercise Option Period 1, but soon discovered that the COTR, LTC Conyers, lacked required COTR training. Ex. N. On January 9, 2007, Ms. Isicson contacted NBC about the status of the yet-to-beissued modification. Ex. O. Ms. Carter notified Ms. Isicson of the COTR's training deficiency and advised that the contract modification to exercise Option Year 1 could not be issued until the COTR completed training. Ex. P. In mid-March, the OPG suggested a new COTR, Gerald Patterson. Ex. Q. In June, 2007, NBC became aware that the Small Business Administration required Chenega to re-certify its 8(a) status, and Campbell instructed her staff that no new awards could be made, or options on existing contracts exercised, until Chenega's 8(a) status was resolved. Ex. R. On June 22, 2007, Mr. Haskin advised Chenega that NBC would not exercise the option period due to the delay period since the expiration of TO 0052. Ex. S. Mr.

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Haskin also informed Chenega that because Chenega worked beyond the period of performance of the base year "at [its] own risk," NBC would not authorize payment for services rendered after base period expired. Id_~. On July 2, 2007, Chenega requested that NBC reverse its decision to not exercise the option period. Ex. T. On August 6, 2007, Campbell advised Chenega that its request for reconsideration was denied. Ex. U. On November 28, 2007, Chenega submitted a certified claim to Mr. Haskin seeking $169,956.17 for services rendered after the base period of performance ended on December 8, 2006. Ex. V. On January 11,2008, Mr. Haskin issued the Contracting Officer's Final Decision denying Chenega's claim because Chenega worked without a contract in place at its own risk. Ex. W. On March 19, 2008, Chenega commenced the instant litigation. ARGUMENT I. Standard Of Review A motion to dismiss for failure to state a claim upon which relief can be granted is appropriate when the facts asserted by the claimant do not under the law entitle him to a remedy. Perez v. United States, 156 F.3d 1366, 1370 (Fed. Cir. 1998). In considering such a motion, the court assumes all well-pied factual allegations as true and makes all reasonable inferences in favor of the non-movant. See id. "While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations,.., a plaintiff' s obligation to provide the 'grounds' of his 'entitle[meat] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955, 1964-65 (2007) (citations omitted). In order to survive a 12(b)(6) motion to dismiss, the complaint must allege "enough fact[s] to raise a reasonable expectation that discovery will reveal

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evidence" to support the claims. See id. at 1965. The court must consider all documents attached to the complaint, as well as the complaint itself, when ruling upon a 12(b)(6) motion to dismiss. See RCFC 10(c) ("A copy of any written instrument which is an exhibit to a pleading is a part thereof for all purposes."); Tellabs, Inc. v. Makor Issues & Rights, Ltd., 127 S. Ct. 2499, 2509 (2007) ("courts must consider the complaint in its entirety, as well as other sources courts ordinarily examine when ruling on Rule 12(b)(6) motions to dismiss, in particular, documents incorporated into the complaint by reference, and matters of which a court may take judicial notice.") (citation omitted). With regard to summary judgment, '°[t]he focus in determining whether SUlnmary judgment is appropriate is the lack of disputed material facts. A material fact has been defined as a fact that will make a difference in the outcome of a case." Curtis v. United States, 144 Ct. C1. 194, 199, 168 F. Supp. 213,216 (1958). Stated differently, only disputes over facts that might affect the outcome of a suit will properly prevent an entry of judgment. Anderson v. Liberty Lobby Inc., 477 U.S. 242, 248 (1986). II. Chenega Knowingly Rendered Services Without A Contract There is no dispute that Chenega was party to a contract with the Army, and that Chenega rendered services pursuant to that contract from December 9, 2005 through December 8, 2006. Chenega, however, seeks payment for work it performed from December 9, 2006 through June 22, 2007 - after the contract's base period expired. Compl. ~ 1. Because the Government never exercised Option Year 1 and Chenega undertook the work at its own risk, however, it is not entitled to compensation. The general requirements for a binding contract with the United States are identical for both express and implied contracts. Trauma Serv. Group v. United States, 104 F.3d 1321, 1324 (Fed. Cir. 1997). The pax~y alleging a contract must demonstrate

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mutual intent to contract, including an offer and acceptance, and a Govermnent representative who had actual authority to bind the Government. Id__~. Contracting officers have the sole authority to bind the Government to contracts and contract modifications. See FAR 1.601; Flexflab, L.L.C.v. United States, 424 F.3d 1254, 1260 (Fed. Cir. 2005). Anyone entering into an arrangement with the Government has the duty to accurately ascertain that the contract was properly formed and binding as to its terms. See, e._,~., Green v. Mgmt. Corp. v. United States, 42 Fed. C1.411,443 (1998) (finding that, in the absence of an option exercised in m'iting, "the work was unauthorized and undertaken at the contractor's risk"). Where a contractor performs unauthorized work, the contractor bears the risk that it will not be paid. Id___~. This result "is firmly grounded in the public policy goal of protecting the public treasury from depletion by claims brought pursuant to unauthorized govermnent contracts." Flexfab, 424 F.3d at 1260. The Govermnent's exercise of an option must be in exact accord.with the terms of the contract. See Lockheed Martin IR Imaging Sys.~ Inc. v. United States~ 108 F.3d 319, 323-24 (Fed. Cir. 1997) (quoting Corbin on Contracts, § 284 (1963) ("an option must be exercised ~in exact accord with the terms of the option'"); New England Tank Indus. of New Hampshire v. United States~ 861 F.2d 685,687 (Fed. Cir. 1989) ("It is well settled that to properly exercise that option, the government's acceptance of the offer had to be unconditional and in exact accord with the terms of the contract being renewed."). Pursuant to the Contract, Option Year 1 under TO 0052 could only be exercised in writing. Exs. A, D. The Contract contained two option years, each of which was exercised in writing tlv'ough the issuance of modifications. Ex. B (Modification Nos. P00003, P00004, 0010). Additionally, the Contract contained an ordering clause, FAR 52.216-18, incorporating the terms of the contract into any resulting delivery or task

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orders pursuant to the Contract. Ex. A at I-8. Accordingly, the terms of the Contract applied to TO 0052 and required that any option be exercised be in writing. Contrary to Chenega's legal argument that the option should be "deemed exercised," the Govermnent did not exercise Option Year 1, in writing or otherwise. NBC's contracting officers represented to Chenega that the Govermnent was not obligated for Option Year 1 unless and until it issued a modification to exercise the option period. On December 1, 2006, seven days before the expiration of the base period, NBC notified the OPG that it had not received funding for Option Year 1, and would likely not be able to issue the m'itten exercise of the option before the base period ended. Ex. H. Chenega was copied on this communication. Id__~. On December 5, 2006, Ms. Campbell warned Chenega that "any time a contractor works without benefit of a signed contract they are working at risk ....If and when a modification is issued to " exercise the option[,] CTSC will be allowed to invoice for services .... Ex. L. Finally, on December 8, 2006 -the last day of the base period - Chenega received the Govermnent's "preliminm2¢ notice" of intent to extend the Contract. Ex. M. The letter stated, however, that it "does not in any way commit or obligate the Government. Should the Government extend the term of the contract, a modification will be issued." Id._:. While the Government expected to issue the modification to exercise Option Year 1, the fact remains that no modification was ever issued. And at no time did the Government suggest that Option Year 1 could be exercised without the issuance of a written modification. Chenega asserts that Option Year 1 was "deemed exercised" when NBC received the option year funding - the "sole condition for exercise of the option" - from the Army. Compl. at ~ 8. Chenega's argument, however, is flawed and unsupported. 9

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In Green Mgmt. Corp. v. United States, 42 Fed. CI. 411 (1998), this Court rejected a "deemed exercised" argument regarding an option year in a govenm~ent contract. In Green, the Department of Housing and Urban Development (°°HUD") awarded a two-year contract to GMC for management services of HUD-owned properties. Id__~. at 414. The contract required that options to extend the term be exercised in writing. Id__~. at 443. Among other things, the contractor alleged that after the completion of the two-year initial term, the one-year option was "deemed to have [been ] exercised" because it "directed GMC to continue performance under the... Contract." Id_~. at 441-42. In rejecting GMC's argument, the Court stated that "the Federal Circuit has held that an option must be exercised °in exact accord with the terms of the option.'" Id__:. at 442-43 (quoting Loclcheed Martin IR hnaging Sys., Inc. v. West, 108 F.3d 319, 323 (Fed. Cir. 1997). The Court noted that the written notice was not provided to GMC, as required by the contract. The Court held that °Coral communication, or for that matter, conduct, are not competent to exercise an option under the 1986 contract. Options must be specifically exercised in writing." Id_~. at 443. Thus, the Court concluded that GMC's "work was unauthorized and undertaken at the contractor's risk." Id___~. (citing Federal Crop. Ins. Corp. v. Merrill, 332 U.S. at 384). Based upon the analysis in Gree___~n, the Court should reject Chenega's argument that TO 0052's Option Year 1 was "deemed exercised." The contract required options to be exercised in writing - a fact made clear to Chenega in communications from the contracting officer and in the December 8, 2006 notice. The facts as alleged in Chenega's complaint, therefore, fail to state a claim upon which relief can be granted.

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No Implied-In-Fact Contract Existed Between Chenega And The Government. Chenega additionally asserts that "[a]s the third part[y] beneficiary and recipient of the services provided under TO-52, there is a contract implied in fact between CTSC and the Army." Compl. ~[ 16. Chenega's alternative theory, however, is without merit. "The general requirements for a binding contract with the United States are identical for both express and implied contracts." Trauma Serv. Group v. United States, 104 F.3d 1324, 1325 (Fed. Cir. 1997). An implied-in-fact contract must be "'founded upon a meeting of the minds, which, although not embodied in an express contract, is inferred, as a fact, from the conduct of the parties showing, in the light of the surrounding circumstances, their tacit understanding.'" Id__~. at 1326 (quoting Hercules Inc. v. United States, 516 U.S. 417, 424 (1996)). An implied-in-fact contract also requires an authorized agent of the Government. Id. An implied-in-fact contract cannot exist, however, if an express contract already covers the same subject matter, se__e_e id__:. (citing Atlas Corp. v. United States, 895 F.2d 745,754-55 (Fed. Cir. 1990)), "unless the implied contract is entirely unrelated to the express contract." Atlas Corp., 895 F.2d at 754-55 (emphasis added). Chenega's claim fails because its complaint fails to plead the requisite elements to support this claim. Chenega has not alleged an implied-in-fact contract founded upon a meeting of the minds. Further, Chenega has not alleged that such a meeting of the minds occurred with an authorized Government agent. In fact, NBC's contracting officers notified Chenega that any work it performed prior to the issuance of a contract modification to exercise Option Year 1 would be undertaken at Chenega's risk. Thus, Chenega has not, and cannot, demonstrate the requisite "meeting of the minds" necessary

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to support the existence of an implied-in-fact contract. See Girling Health Sys. v. United States, 949 F.2d 1145, 1147 (Fed. Cir. 1991) (dismissing complaint for failure to establish contractual elements). Further, an express contract controlled Chenega's performance of TO 0052 and required the issuance of a written modification to exercise Option Year 1, which precludes Chenega from alleging the existence of an implied-in-fact contract. CONCLUSION For the reasons set forth above, the Court should dismiss plaintiff' s complaint pursuant to RCFC 12(b)(6). In the alternative, defendant respectfully requests that the Court grant summary judgment in its favor pursuant to RCFC 56.

Respectfully submitted, GREGORY G. KATSAS Assistant Attorney General JEANNE E. DAVIDSON Director

s/Reginald Blades REGINALD BLADES Assistant Director

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s/Sean M. Dum~ SEAN DUNN Trial Attorney Commercial Litigation Branch Civil Division Department of Justice Attn: Classification Unit 1100 L Street, N.W., 8th Floor Washington, D.C. 20530 Tele: (202) 616-0883 Fax: (202) 353-7988 Attorneys for Defendant
July 18, 2008

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CERTIFICATE OF FILING I hereby certi~ that on this 18th day of July 2008, a copy of the foregoing "Defendant's Motion To Dimsiss Or, In The Alternative, Motion For Summary Judgment," was filed electronically. I understand that notice of this filing will be sent to all parties by operation of the Court's electronic filing system. Parties may access this filing through the Court's system.

s/Sean M. Dram