Mansoor International Development Services, Inc. v. United States

In the United States Court of Federal Claims

No. 14-496C

(Filed: May 11, 2015)

********************************** ) Contractual dispute over trucking

) services in Afghanistan; motion to

MANSOOR INTERNATIONAL ) dismiss count of the complaint alleging

DEVELOPMENT SERVICES, INC., ) breach of the implied covenant of good

) faith and fair dealing

Plaintiff, )

)

v. )

)

UNITED STATES, )

)

Defendant. )

)

**********************************

Thomas M. Brownell, Holland & Knight LLP, McLean, Virginia, for plaintiff. With

Mr. Brownell on the brief was Terry L. Elling, Holland & Knight LLP, McLean, Virginia.

Michelle R. Musgrave and Scott A. MacGriff, Trial Attorneys, Commercial Litigation

Branch, Civil Division, United States Department of Justice, Washington, D.C., for defendant.

With Ms. Musgrave on the briefs were Joyce R. Branda, Acting Assistant Attorney General,

Civil Division, Robert E. Kirschman, Jr., Director, and Reginald T. Blades, Jr., Assistant

Director, Civil Division, United States Department of Justice, Washington, D.C. Of counsel was

Major Jennifer A. McKeel, Litigation Attorney, United States Army Legal Services Agency, Fort

Belvoir, Virginia.

OPINION AND ORDER

LETTOW, Judge.

This case arises from a contract dispute between Mansoor International Development

Services, Inc. (“Mansoor” or “plaintiff”) and the United States (“the government”), acting

through the United States Army, Bagram Regional Contracting Center (“the Army”). In August

2011, Mansoor entered into an indefinite delivery/indefinite quantity (“IDIQ”) contract with the

Army to provide trucking services in Afghanistan, which was terminated for default in March

2012. Compl. ¶¶ 4-5, 7. Thereafter, Mansoor submitted a claim to the contracting officer in the

amount of 81,473,654 Afghani (“AFN”) seeking payment for various invoices. Compl. ¶ 8.1 In

June 2013, the contracting officer issued a final decision partially denying Mansoor’s claim for

payment. See Compl. Attach. B (Contracting Officer’s Final Decision (June 11, 2013)).

Mansoor brings this action pursuant to the Contract Disputes Act (“CDA”),2 alleging

breach of contract (Count I), Compl. ¶¶ 16-19, and breach of the implied covenant of good faith

and fair dealing (Count II), Compl. ¶¶ 20-25. The government has filed a motion to dismiss

Count II of the complaint for lack of subject matter jurisdiction pursuant to Rule 12(b)(1) of the

Rules of the Court of Federal Claims (“RCFC”) and for failure to state a claim upon which relief

can be granted pursuant to RCFC 12(b)(6). See Def.’s Mot. to Dismiss Count II of Pl.’s Compl.

for Lack of Subject Matter Jurisdiction and Failure to State a Claim (“Def.’s Mot.”) at 1, ECF

No. 16. The government’s motion has been fully briefed and was addressed at a hearing held on

May 8, 2015.

BACKGROUND3

Mansoor is an Afghan corporation based in Kabul, Afghanistan. Compl. ¶ 2. On or

about August 11, 2011, the Army awarded to Mansoor contract number W91B4N-11-D-7011

(“the contract”) for approximately 48,307,159,600 AFN. Compl. ¶ 4. The award was a multi-

award IDIQ contract to provide trucking services in Afghanistan on an initial 12-month term

pursuant to the National Afghan Trucking (“NAT”) program. Compl. ¶¶ 5, 7. The contract

divided the transportation missions into three “Suites”— Suite I (Bulk Fuels), Suite II (Dry

Cargo), and Suite III (Heavy Cargo) — based upon the type of cargo being transported and the

equipment needed for such transportation. Compl. ¶ 6. For services under each Suite, the

contract specified a series of fixed unit prices attributed to completed mission units, assets used,

and responsibility for security of the mission. Compl. ¶ 6.

Under the terms of the contract, the Army issued task orders consisting of Transportation

Movement Requests (“TMRs”) for transportation missions. Compl. ¶ 5. The TMRs were

awarded on a competitive basis based upon NAT contractors’ rankings. Compl. ¶ 5. Payment of

the TMRs was determined by fixed-unit prices for services, distances, and delays, in addition to

other factors. Compl. ¶ 5. Payment was subject to reduction or back-charge due to quality

assurance and control factors, such as “unexcused delays, failures to comply with performance

objectives, failures to complete the mission[,] and/or pilferage or loss of the cargo.” Compl. ¶ 5.

Further, under paragraph 5.4 of the contractual Performance Work Statement (“PWS”), a

1

The Afghani (code: “AFN,” symbol: “Afs”) is the currency of Afghanistan. The

claimed amount, 81,473,654 AFN, amounts to 1,406,660 USD, at an exchange rate of 1 AFN =

0.01727 USD. See Compl. n.1.

2

The Contract Disputes Act of 1978, as amended, is codified at 41 U.S.C. §§ 7101-09.

3

The recitation that follows does not constitute findings of fact by the court and is

provided solely to establish a context for deciding the currently pending motion.

2

mission completed more than seven days past the required delivery date was considered “failed”

and no compensation would be awarded. Compl. Attach. B ¶ 4a.

On March 31, 2012 the Army terminated its contract with Mansoor for default. Compl.

¶ 7.4 Thereafter, Mansoor submitted a certified claim to the contracting officer in the amount of

81,473,654 AFN for “some 519 TMRs, previously submitted under various invoices, that the

[g]overnment had refused to pay, in whole or in part, for the period between September, 2011

and June, 2012.” Compl. ¶ 8; see also Compl. Attach. A (Certification of Claims for Contract

No. W91B4N-11-D-7011 (Feb. 22, 2013)). After receiving Mansoor’s claim, the contracting

officer notified plaintiff that the Army was willing to discuss a settlement for the 519 TMRs at

issue. See Compl. Attach. B ¶ 4. During a teleconference held on April 25, 2013, the Army

explained “that settlement negotiation would center around a single claim adjudication that

would encompass all 519 TMRs which constituted [Mansoor’s] claim” and offered to pay

Mansoor a portion of its original claim. Compl. Attach. B ¶ 5. In response, Mansoor requested

that the Army evaluate each TMR individually, and on May 26, 2013, it submitted a

counteroffer. See Compl. Attach. B ¶¶ 5, 8. On June 5, 2013, the contracting officer provided

Mansoor a further counteroffer. See Compl. Attach. B ¶ 9. Mansoor rejected this latest offer and

stated that its previous counteroffer still stood. See Compl. Attach. B ¶ 9. At that time, the

Army felt that Mansoor was not willing to negotiate “in good faith by indicating [its] previous

counteroffer [still stood] even though the [g]overnment offered a higher offer.” Compl. Attach.

B ¶ 9.

Facing a stalemate in settlement negotiations, the contracting officer issued a final

decision on June 11, 2013 in accord with the Federal Acquisition Regulations, 48 C.F.R.

(“FAR”) § 33.210. See Compl. Attach. B.5 The contracting officer stated that the Army

“agree[d] that [Mansoor] ha[d] established entitlement to part of its claims, but, based on the

results of [an] audit[,] the [Army] disagree[d] with [Mansoor] that the entirety of the claim [was]

valid.” Compl. Attach. B ¶ 9. The audit was based on an “Aggregate Claims Adjudication

(‘ACA’) method” which segregated non-meritorious TMRs, compared categories of TMRs, and

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Relatedly, the termination for default is under appeal before the Armed Services Board

of Contract Appeals (“ASBCA”) as case number ASBCA 58423. Compl. ¶ 7. That appeal has

been consolidated with other pending appeals from Mansoor related to the contract at issue. See

Def.’s Mot. at 3 n.2.

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The provision of the FAR states, in relevant part:

[C]ontracting officers are authorized, within any specific limitations

of their warrants, to decide or resolve all claims arising under or

relating to a contract subject to the [Contract] Disputes [Act]. In

accordance with agency policies and 33.214, contracting officers

are authorized to use ADR procedures to resolve claims. . . .

FAR § 33.210.

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conducted a sampling of individual TMRs. Compl. Attach. B ¶ 2. According to the contracting

officer,

[t]he ACA method utilizes historical data to produce a baseline for

sampling of a NAT contract carrier’s claims. To prepare a

proposal, the contracting officer uses the ACA method to develop

a statistically sound payout expectation. The ACA results are then

compared to a historical data trend analysis to audit the validity of

a carrier’s claim. Given the discrete set of variables affecting the

payout of individual TMRs, the large sample size of TMRs, and

standard statistical analysis, the ACA auditing method produces a

sound method for evaluating a particular NAT contract carrier’s

overall claim for a set of TMRs submitted.

Compl. Attach. B. ¶ 3. This approach indicated that several TMRs reflected failed missions

where Mansoor did not ensure timely delivery pursuant to the PWS or comply with a Required

Spot Date. Compl. Attach. B. ¶¶ 4a-c; see also Compl. ¶ 9. Additionally, a large percentage of

TMRs submitted by Mansoor lacked military grid reference system coordinates and other data

“which would identify performance measurement standards necessary to validate basic

transportation services.” Compl. Attach. B. ¶ 4d. Based on the ACA method, the contracting

officer determined that Mansoor was only entitled to 30,000,000 AFN of its total claim. Compl.

Attach. B ¶ 9.

Just short of one year after the final decision, on June 9, 2014, Mansoor filed a complaint

in this court. Count I of the complaint alleges that the Army breached the contract by refusing to

pay, in full or in part, for the 519 TMRs included in Mansoor’s certified claim. Compl. ¶ 17. In

Count II, Mansoor contends that the Army breached the implied covenant of good faith and fair

dealing because the contracting officer failed to “fairly and independently consider the merits of

the contractor’s claim.” Compl. ¶ 24. Mansoor alleges that the contracting officer “applied

undisclosed statistical analyses, involving data from other contracts, to the gross amount of

[Mansoor’s] claim, [and] refus[ed] to consider or negotiate with [Mansoor] the merits of

individual claim elements.” Id.6 In terms of relief, Mansoor seeks damages in the amount of

75,000,000 AFN, in addition to “interest, costs of suit[,] and other relief as to the [c]ourt may

seem just and proper.” Compl. at 7.

6

After filing its complaint, Mansoor submitted a motion to consolidate the current case

with the appeals pending before the ASBCA. Pl.’s Mot. to Consolidate Appeal with Appeals

Pending Before the Armed Services Board of Contract Appeals, ECF No. 10. The government

objected, representing to the court that it was exploring whether Mansoor engaged in fraud

during performance of the underlying contract and contending that this court should retain

jurisdiction because it possesses the juridical power to hear fraud claims. See Def.’s Response in

Opp’n to Pl.’s Mot. to Consolidate and Request for an Extension of Time, ECF No. 11. In these

circumstances, the court issued an order on January 23, 2015 denying Mansoor’s motion to

consolidate without prejudice to potential renewal. See Order of Jan. 23, 2015, ECF No. 15.

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STANDARDS FOR DECISION

A. Jurisdiction

Before proceeding to the merits, “a court must satisfy itself that it has jurisdiction to hear

and decide a case.” Hardie v. United States, 367 F.3d 1288, 1290 (Fed. Cir. 2004) (quoting

PIN/NIP, Inc. v. Platte Chem. Co., 304 F.3d 1235, 1241 (Fed. Cir. 2002)) (internal quotation

marks omitted). When deciding whether to dismiss a motion under Rule 12(b)(1) for lack of

subject matter jurisdiction, the court will “normally consider the facts alleged in the complaint to

be true and correct.” Reynolds v. Army & Air Force Exch. Serv., 846 F.2d 746, 747 (Fed. Cir.

1988) (citing Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)). The plaintiff bears the burden of

“alleg[ing] in his pleading the facts essential to show [subject matter] jurisdiction” by a

preponderance of the evidence. McNutt v. General Motors Acceptance Corp. of Ind., 298 U.S.

178, 189 (1936); see also Reynolds, 846 F.2d at 748.

B. Failure to State a Claim

Dismissal is warranted under Rule 12(b)(6) if the “facts asserted by the claimant do not

under the law entitle him [or her] to a remedy.” Perez v. United States, 156 F.3d 1366, 1370

(Fed. Cir. 1998). To survive a motion to dismiss for failure to state a claim, the plaintiff’s

complaint must “contain sufficient factual matter, accepted as true, to ‘state a claim to relief that

is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678, (2009) (quoting Bell Atl. Corp. v.

Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible “when the plaintiff pleads

factual content that allows the court to draw the reasonable inference that the defendant is liable

for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556). Additionally, the facts

alleged must “‘plausibly suggest[] (not merely [be] consistent with)’ a showing of entitlement to

relief.” Cary v. United States, 552 F.3d 1373, 1376 (Fed. Cir. 2009) (quoting Twombly, 550 U.S.

at 557). Although the complaint “does not need detailed factual allegations,” Twombly, 550 U.S.

at 545, it must present more than “‘naked assertion[s] devoid of ‘further factual enhancement,’”

Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 557) (alteration in original), or “the-

defendant-unlawfully-harmed-me-accusation[s],” id. (citing Twombly, 550 U.S. at 555). The

court must “draw on its judicial experience and common sense” in determining whether the

plaintiff has pled adequate facts to allow the court to infer that his or her entitlement to relief is

plausible—not merely possible, id. at 679, and “must accept as true the complaint’s undisputed

factual allegations and should construe them in a light most favorable to the plaintiff,”

Cambridge v. United States, 558 F.3d 1331, 1335 (Fed. Cir. 2009) (citing Papasan v. Allain, 478

U.S. 265, 283 (1986); Gould, Inc. v. United States, 935 F.2d 1271, 1274 (Fed. Cir. 1991)).

ANALYSIS

A. Subject Matter Jurisdiction

The government’s motion to dismiss Count II of the compliant pursuant to RCFC

12(b)(1) initially propounds the well-established premise that a contracting officer’s final

decision is only a jurisdictional prerequisite for a CDA suit in this court and the merits of the

dispute are addressed de novo without deference accorded to the contracting officer’s final

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decision. See Def.’s Mot. at 8-9; see also Hernandez, Kroone & Associates, Inc. v. United

States, 110 Fed. Cl. 496, 519 (2013), reconsid. denied, 2013 WL 3199299 (Fed. Cl. June 25,

2013) (“Under the Contract Disputes Act, submission of a claim to the contracting officer is a

necessary prerequisite to bringing a direct action suit upon denial of the claim, but the

proceeding on the matter in this court is de novo, not an appeal of the contracting officer’s

denial.”) (citing 41 U.S.C. §§ 7103(e), 7104(b)(4)). The government then builds on this

principle by reclassifying and redefining Mansoor’s claim, averring that “the crux of Mansoor’s

claim for breach of the covenant of good faith and fair dealing appears to be that the contracting

officer did not analyze the TMRs in the manner that Mansoor requested.” Def.’s Mot. at 8. The

government argues that this premise for Mansoor’s claim is “irrelevant to the proceedings in this

[c]ourt because Mansoor must ‘prove the fundamental facts of liability and damages de novo.’”

Id.; see also Def.’s Reply in Support of its Mot. to Dismiss Count II of Pl.’s Compl. for Lack of

Subject Matter Jurisdiction and Failure to State a Claim (“Def.’s Reply”) at 3, ECF No. 19

(quoting Wilner v. United States, 24 F.3d 1397, 1401 (Fed. Cir. 1994)). From this constructed

postulate, the government leaps to the conclusion that the court lacks the juridical power “to

entertain Mansoor’s request that the [c]ourt review the contracting officer’s final decision.”

Def.’s Mot. at 9.

Mansoor’s response also begins with a well-recognized axiom involving the implied

covenant of good faith and fair dealing, i.e., that “[t]he implied covenant of good faith and fair

dealing requires that the [g]overnment, including the [c]ontracting [o]fficer[,] ‘not . . . act so as

to destroy the reasonable expectations of the other party regarding the fruits of the contract.’”

Pl.’s Opp’n to Defendant’s Mot. to Dismiss Count II of Pl.’s Compl. for Lack of Subject Matter

Jurisdiction and Failure to State a Claim (“Pl.’s Opp’n”) at 3, ECF No. 18 (quoting Metcalf

Const. Co. v. United States, 742 F.3d 984, 991 (Fed. Cir. 2014) (in turn quoting Centex Corp. v.

United States, 395 F.3d 1283, 1304 (Fed. Cir. 2005))). Mansoor maintains that the Army

breached the implied covenant of good faith and fair dealing by applying the ACA methodology,

which allegedly constituted an approach to enforcement that was neither contemplated by the

parties nor consistent with the express terms of the contract. See Pl.’s Opp’n at 4. A claim based

upon these allegations, according to Mansoor, falls within the jurisdictional purview of this

court.

The government disputes that the claims in Count II of the complaint pertain to a breach

of an obligation in the contract. See Def.’s Reply at 2 (“Mansoor’s response attempts to change

the focus of its complaint from taking issue with the method by which the contracting officer’s

final decision analyzed its claim to now suggesting that it has alleged a breach of an unidentified

express contract provision.”). Rather, it urges that “Mansoor’s allegations reflect a disagreement

with the contracting officer’s approach to Mansoor’s claim” and are insufficient to invoke this

court’s jurisdiction because a contracting officer’s final decision is irrelevant to this court’s de

novo review. See id. at 2-4.

The government’s contention is sophistic and untenable. Although it is true that “once an

action is brought following a contracting officer’s decision, the parties start in [this] court . . .

with a clean slate,” Wilner, 24 F.3d at 1402, de novo consideration of a claim does not wholly

ignore what the contracting officer actually did. For this court to possess subject matter

jurisdiction under the CDA, “the contractor must submit a proper claim—a written demand that

6

includes (1) adequate notice of the basis and amount of a claim and (2) a request for a final

decision. In addition, the contractor must have received the contracting officer’s final decision

on that claim.” M. Maropakis Carpentry, Inc. v. United States, 609 F.3d 1323, 1328 (Fed. Cir.

2010). Here, there is not a want of subject matter jurisdiction because the foregoing

requirements have been satisfied. As plaintiff contends, the court has jurisdiction to determine

whether “the [Army] breached its duty of good faith and fair dealing by not (1) reviewing

[Mansoor’s] TMRs, (2) processing its invoices, and (3) determining its [c]laim in accordance

with the express terms of the [c]ontract.” Pl.’s Opp’n at 4.

B. Breach of the Implied Covenant of Good Faith and Fair Dealing

The government’s contention that Mansoor has failed to state a claim upon which relief

can be granted reprises its jurisdictional arguments, converting them to a charge that Count II of

the complaint lacks the requisite factual allegations to support a claim for breach of the implied

covenant of good faith and fair dealing. See Def.’s Mot. at 9; see also Def.’s Reply at 3. In the

government’s view, the implied duty of good faith and fair dealing “is limited to ensuring

compliance with the express terms of the contract and, thus, does not create obligations not

contemplated in the contract itself.” Def.’s Mot. at 9 (citing Bradley v. Chiron Corp., 136 F.3d

1317, 1326 (Fed. Cir. 1998); United States v. Basin Elec. Power Co-op., 248 F.3d 781, 796 (8th

Cir. 2001)). This argument focusing solely on express terms of a contract would eliminate any

possibility that the implied duty of good faith and fair dealing could itself provide the basis for a

claim that a contract was breached. That is wrong. The implied duty stems from the consensual

terms reflected in an express contract, but it addresses the parties’ reasonable expectations that

may not have been embodied in explicit contractual language.7

7

The government’s contention and the cases it cites in support recycle an argument it

previously made and lost in the court of appeals. The cases were critically distinguished by the

Federal Circuit in Metcalf Construction. See 742 F.3d at 994 (“The government cites [Bradley

and Basin Electric Power Cooperative] to bolster its apparent position, but [neither case] holds

that the implied duty requires a breach of an express contractual duty.”). In Metcalf

Construction, after noting that Bradley “mentions the duty of good faith and fair dealing only in

a parenthetical explaining an intermediate appellate court decision from California,” id., the

court of appeals explained that

In Centex, . . . we declined to read Bradley’s parenthetical expansively,

concluding that “it would be inconsistent with the recognition of an implied

covenant if we were to hold that the implied covenant of good faith and

fair dealing could not be enforced in the absence of an express promise to

pay damages in the event of conduct that would be contrary to the duty of

good faith and fair dealing.” 393 F.3d at 1306. And the government’s other

featured case, . . . Basin Elec. Power Co-op., 248 F.3d 781 . . . , similarly

recognizes that the implied duty in fact is not limited to “the enforcement

of terms actually negotiated.” Id. at 796 (internal quotation marks omitted).

Id.

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A claim that a party to a contract breached the duty of good faith and fair dealing

implicates common law and is generally addressed by Restatement (Second) of Contracts § 205

(1981). That Section provides that “[e]very contract imposes upon each party a duty of good

faith and fair dealing in its performance and its enforcement.” Restatement (Second) of

Contracts § 205; see also Metcalf Const., 742 F.3d at 990. The Restatement observes that

“[g]ood faith performance or enforcement of a contract emphasizes faithfulness to an agreed

common purpose and consistency with the justified expectations of the other party.”

Restatement (Second) of Contracts § 205 cmt. a. And, “the implied duty exists because it is

rarely possible to anticipate in contract language every possible action or omission by a party

that undermines the bargain.” Metcalf Const., 742 F.3d at 991. Rather, “the nature of that

bargain is central to keeping the duty focused on ‘honoring the reasonable expectations created

by the autonomous expressions of the contracting parties.’” Id. (citing Tymshare, Inc. v. Covell,

727 F.2d 1145, 1152 (D.C. Cir. 1984) (per Scalia, J.)). In short, the duty “prevents a party’s acts

or omissions that, though not proscribed by the contract expressly, are inconsistent with the

contract’s purpose and deprive the other party of the contemplated value.” Id. (citing First

Nationwide Bank v. United States, 431 F.3d 1342, 1350 (Fed. Cir. 2005)).

The duty of good faith and fair dealing most often is raised respecting the parties’

performance obligations, but it also explicitly pertains to enforcement. See Restatement (Second)

of Contracts § 205 cmt. e (“The obligation of good faith and fair dealing extends to the assertion,

settlement and litigation of contract claims and defenses.”). “Bad faith” is not a necessary

element of the duty in this regard. Importantly, the duty “also extends to dealing which is candid

but unfair.” Id. That essentially is the tenor of the allegations Mansoor presents in Count II.

Plaintiff is asserting that the contracting officer breached the duty of good faith and fair dealing

by addressing its claims using a statistical or quasi-statistical means, i.e., the “ACA method,”

that incorporated data derived from performance of unrelated contracts and did not focus on the

individual circumstances of each of the TMRs at issue. Whether that approach to enforcement

was reasonable in the setting of this contract is a question for another day, the answer to which

will turn in substantial part on the parties’ expectations under the contract. Nonetheless,

Mansoor has manifestly stated a potentially viable claim for relief based on an alleged breach of

the implied duty of good faith and fair dealing in the enforcement of the contract at issue.

CONCLUSION

For the reasons stated, the government’s motion to dismiss pursuant to RCFC 12(b)(1),

or, alternatively, RCFC 12(b)(6) is DENIED. The parties shall proceed with discovery and other

pretrial preparatory steps in accord with the scheduling order issued on April 6, 2015.

It is so ORDERED.

s/ Charles F. Lettow

Charles F. Lettow

Judge

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