Free Response to Motion [Dispositive] - District Court of Federal Claims - federal

Case 1:08-cv-00191-FMA

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS

CHENEGA TECHNOLOGY SERVICES CORPORATION, Plaintiff, v. THE UNITED STATES,

) ) ) ) ) ) Defendant. ) ____________________________________)

No. 08-191C Judge Allegra

PLAINTIFF'S OPPOSITION TO DEFENDANT'S MOTION TO DISMISS AND MOTION FOR SUMMARY JUDGMENT

Plaintiff, by counsel, requests the Court to deny the Government's Motion to Dismiss and Motion for Summary Judgment because claims for which relief can be granted are set forth in the complaint and summary judgment is inappropriate. In support of its opposition, Plaintiff has filed its Proposed Statement of Uncontroverted Facts, Response to Defendant's Statement of Uncontroverted Facts, and Plaintiff's Exhibits.

STATEMENT OF THE CASE

Rather than simply repeat the Government's Statement of the Case, Chenega will limits it's responses to those items which are in disagreement or in need of amplification. First, there is nothing in the prime contract or in the Task Order 0052 which address either the necessity of a COTR or states the minimum level of training required of a COTR. 1

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Second: While this point may seem obvious, Chenega played no role in COTR training and did not influence in any way the appointment of Major (later LtCol.) Conyers as COTR. Conyers had been appointed in the prior task order term. Plaintiff made the eminently reasonable assumption that Conyers had all the qualifications necessary to be the COTR when he was initially appointed, and Chenega had no reason to believe that anything had changed. Third: There are no facts in the record of a nexus between the absence of COTR training and the actual performance by the COTR of his duties. There is nothing to suggest that Conyers was in any way deficient or incompetent. There is nothing to suggest that Conveys actually needed training in order to do his job. Fourth: The Contracting Office knew that Chenega was continuing contract performance after the expiration of TO 0052 on December 8, 2006, and took no action to prevent the performance. He also knew that Chenega had been assured and reassured that the only impediment to complete the formal option exercise was funding and that the funding had been received. The first occasion where the COTR training requirement was communicated to Chenega was on January 9, 2007 by email. Exhibit 1. Fifth: On February 26, 2007, CTS received an email from the Army that the COTR had completed the necessary training and received a certification that met DOI's requirement for COTR training. Exhibit 2. Chenega reasonably relied on the information contained in the February 26, 2007 email in continue in continuing to perform TO 0052. Sixth: On May 4, 2007, DOI provided its first written notification to Chenega that the COT had not fulfilled the training requirement. Exhibit 3. The Government did not provide a full explanation of the COTR training requirement until May 17, 2007, (and only at Chenega's request). Exhibit 4.

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Seventh: On June 12, 2997, DOI was notified by the Army that the COTR had completed the required training. Exhibit 5. At this point, there was no legal barrier to the exercise of the option. Eighth: Virtually all of the work done by Chenega was for the benefit of the Army. The Army has the sole ability and (apparently) responsibility of training the COTR. While it is undoubtedly true that the Army knew that it was enjoying the fruits of Chenega's labors, the record does not lend itself to a determination of those persons who knew, and their levels of authority and responsibility. Finally, the Army never communicated anything to Chenega relating to Conyer's training or lack thereof.

Standard of Review

While the Government's Standard of Review does no violence, plaintiff would add the well-established principal that in deciding a Rule 12 motion, the facts alleged in the complaint are usually construed in a light most favorable to the non-movant. "Generally, determinations pursuant to RUSCC 12 motions to dismiss are normally limited to the pleadings. In this connection, "it is well established that facts alleged in the complaint are usually construed in a light most favorable to the non-movant." Cupey Bajo Nursing Home, Inc. v. United States, 23 Cl.Ct. 406, 411 (1991). See, e.g., Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974). Montego Bay Imports, Ltd. v. U.S. 25 Cl.Ct. 639 Cl.Ct.,1992.

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With regard to the standard of review for a summary judgment motion, plaintiff would supplement the Government's description of the standard with the additional point that the court must evaluate the motion, "taking care to draw all reasonable inferences against the party whose motion is under consideration." Burnett Const. Co. v. U.S. 26 Cl.Ct. 296, Cl.Ct. 1992, citing Mingus Constructors, Inc. v. United States, 812 F.2d at 1391.

1. THE GOVERNMENT IS DEEMED TO EXERCISE THE OPTION WHEN FUNDING WAS RECEIVED. The allegations and evidence unequivocally shows that the Government enticed Chenega into continuing contract performance with the promise that the option would be exercised as soon as funding was secured. The funding was secured and the condition met. No other conditions were stated or implied. The exercise of the option did not in any way attempt to change any other provision of the contract. Thus, the exercise was done in strict compliance with the terms and conditions. There was not attempt to impose a constructive and express change in connection with the exercise of the option. Chenega was clearly informed that it assumed risk when it decided to continue performance. However, the only risk it assumed was that of funding. It is true that option must be exercised in "strict compliance" with the terms and conditions of the contract. Here, there was no attempt to change the terms of the contract. The Government did not say it would exercise the option if Chenega agreed to different rates, or a new scope of work. The Government wanted Chenega to simply continue the same work for the same pay, subject to obtaining funding.

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The usual statement of the law of options is inapplicable to this case. The reason is that under the facts of all the cases which have not enforced a conditional or qualified exercise is that either the condition was something the contractor needed to do or the condition or qualification had not been fulfilled. A fair statement of the law as ordinarily found in option cases is "In order to bind appellant, "The acceptance of an option ... must be unqualified, absolute, unconditional, unequivocal, unambiguous, positive, without reservation, and according to the terms or conditions of the option." See, Civic Plaza National Bank v. First National Bank in Dallas, 401 F.2d 193, 197 (8th Cir.1968). We have held that any attempt by the Government to alter the conditions of the contractor's obligation, such as the period of performance, will render ineffective the purported exercise of an option. Chemical Technology, Inc., ASBCA No. 21863, 80-2 BCA ¶ 14,728; General Dynamics Corporation, ASBCA No. 20882, 77-1 BCA ¶ 12,504." Appeal of Lear Siegler Inc. Management Services Division 86-3 BCA ¶ 19155, 1986. This does not serve as a basis for the Government to prevail since all of the conditions and qualification have been satisfied and there was nothing conditional on Chenega's actions.

II. CHENEGA MAY RECOVER FOR AN IMPLIED-IN-FACT CONTRACT.

In its legal theory that it may recovery under an implied-in-fact contract, Chenega focuses in the conduct of the Army and not DOI. If the option is deemed to not have been exercised, then the implied contract theory comes into play. An implied-in-fact contract occurs when the conduct of the parties indicates that they have actually manifested their mutual assent but an express offer or acceptance is absent. See Restatement, Second, Contracts §4 and §19, stating that promises may be inferred and that mutual assent may be determined from words or acts. Implied-in-fact contracts are also 5

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recognized in Government contracts, Baltimore & Ohio R.R. v. United States, 261 U.S. 592 (1923). The implied-in-fact agreement may be established from a course of conduct followed by the parties. Algonac Mfg. Co. v. United States, 192 Ct. Cl. 649, 428 F.2d 1241 (1970). The course of conduct is that the Army received services from Chenega at an Army base. The Army must have known that these services were being performed in expectation of payment. The Army had sole control over the appointment of a COTR. The Army is assumed to have known that it had not assigned a properly trained COTR to the DOI contract. The Army never said anything to Chenega about the COTR training deficiency. (At this point in the litigation, we simply don't know who in the Army was aware of these events). Implied-in-fact contracts may also be created through the acceptance of benefits with the knowledge that the contractor expects to be compensated, Pacific Maritime Ass'n v. United States, 123 Ct. Cl. 667, 108 F. Supp. 603 (1952) (labor referral services by the contractor accepted with knowledge that compensation was expected); Buffalo & Fort Erie Pub. Bridge Auth. v. United States, 106 Ct. Cl. 731, 65 F. Supp. 476 (1946) (premises used with knowledge that contractor expected compensation); Equitable Life Assurance Soc'y, GSBCA 8909, 90-3 BCA ¶23,130 (directive to contractor/lessor to replace carpet in leased office space made with knowledge that contractor expected compensation); Robert J. DiDomenico, GSBCA 5539, 82-2 BCA ¶16,093 (building alterations not called for in the contract ordered with knowledge that contractor expected compensation). All of the services at issue were done for the benefit of the Army and at the request of the Army. Common sense dictates that the Army had knowledge that Chenega intended to be paid. It is not a charitable organization, and there is no evidence to refute an expectation of payment.

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III. CHENEGA's 8(a) STATUS IS NOT AN ISSUE. Defendant has submitted a proposed finding that, "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." The legal significance of this finding is unclear. The Government cannot claim that information alleged to have been discovered in June somehow justifies its earlier conduct. More to the point, the statements in the communication are incorrect. Further, nothing in the record shows that Chenega was ever afforded an opportunity to correct the misconception. The communication confuses the requirement for a company to recertify its size eligibility with a non-existent requirement that the company recertify its 8(a) eligibility. The statement also confuses for requirement for recertification of size eligibility in connection with the exercise of an option to extend the term of a prime contract by adding a nonexistent requirement that the recertification requirement be applied to the extension of performance under a task order. Finally, the statement misconstrues the effect of an inability to recertify small business status. If a company is no longer small, the terms and conditions of the existing contract are not changed. The only significant of the inability to recertify size is that the agency may not longer claim credits towards its small business goals for the contract costs. All the above legal points are founded on the terms of the applicable SBA regulation: 13 CFR 121.404(g). A copy of the regulation is attached hereto, marked Appendix A. If the Government is trying to establish that it was prohibited by the SBA rules from exercising the option, its argument is meritless.

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CONCLUSION

For the reasons set forth above, the Court should deny the motion to dismiss plaintiff' s complaint pursuant to RCFC 12(b)(6), and deny the motion for summary judgment.
Respectfully submitted this 25th day of August, 2008. /s/William K Walker William K Walker Walker Reausaw 888 17th Street, NW, Suite 1100 Washington DC 20006 Tele: 202-857-7910 Fax: 202-857-7912

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CERTIFICATE OF FILING

I hereby certify that on this 25th day of August 2008, a copy of the foregoing "Plaintiff's Opposition to Motion to Dismiss" 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/William K. Walker

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APPENDIX A

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13 § 121.404 When does SBA determine the size status of a business concern? .....
(g) A concern that qualified as a small business at the time it receives a contract is considered a small business throughout the life of that contract. Where a concern grows to be other than small, the procuring agency may exercise options and still count the award as an award to a small business. However, the following exceptions apply: ... (3) For the purposes of contracts with durations of more than five years (including options), including Multiple Award Schedule (MAS) Contracts, Multiple Agency Contracts (MACs) and Government-wide Acquisition Contracts (GWACs), a contracting officer must request that a business concern re-certify its small business size status no more than 120 days prior to the end of the fifth year of the contract, and no more than 120 days prior to exercising any option thereafter. If the contractor certifies that it is other than small, the agency can no longer count the options or orders issued pursuant to the contract towards its small business prime contracting goals. The agency and the contractor must immediately revise all applicable Federal contract databases to reflect the new size status. (i) A business concern that certified itself as other than small, either initially or prior to an option being exercised, may recertify itself as small for a subsequent option period if it meets the applicable size standard. (ii) Re-certification does not change the terms and conditions of the contract. The limitations on subcontracting, nonmanufacturer and subcontracting plan requirements in effect at the time of contract award remain in effect throughout the life of the contract. (iii) A request for a size re-certification shall include the size standard in effect at the time of re-certification that corresponds to the NAICS code that that was initially assigned to the contract. (iv) A contracting officer must assign a NAICS code and size standard to each order under a long-term contract. The NAICS code and size standard assigned to an order must correspond to a NAICS code and size standard assigned to the underlying long-term contract. A concern will be considered small for that order only if it certified itself as small under the same or lower size standard. (v) Where the contracting officer explicitly requires concerns to recertify their size status in response to a solicitation for an order, SBA will determine size as of the date the concern submits its self-representation as part of its response to the solicitation for the order. (vi) A Blanket Purchase Agreement (BPA) is not a contract. Goods and services are acquired under a BPA when an order is issued. Thus, a concern's size may not be determined based on its size at the time of a response to a solicitation for a BPA.

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