Afghanistan Trade Transportation Co., Ltd.

ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeal of -- )

)

Afghanistan Trade Transportation Co., Ltd. ) ASBCA No. 59782

)

Under Contract No. W91B4N-06-A-0069 )

APPEARANCES FOR THE APPELLANT: Lawrence M. Prosen, Esq.

Christian F. Henel, Esq.

Thompson Hine LLP

Washington, DC

APPEARANCES FOR THE GOVERNMENT: Raymond M. Saunders, Esq.

Army Chief Trial Attorney

Erica S. Beardsley, Esq.

Trial Attorney

OPINION BY ADMINISTRATIVE JUDGE HARTMAN

ON THE GOVERNMENT'S MOTION FOR SUMMARY JUDGMENT

Appellant seeks $3,367,445.65 for line haul services it provided the Department

of the Army in Afghanistan during 2009 under a Blanket Purchase Agreement (BPA).

The Army moves for summary judgment contending: appellant pied guilty to bribing

a public official in 2008 to receive preferential treatment under the BPA; this criminal

act constituted a material breach of the duty of good faith and fair dealing it owed the

Army under the BPA; and appellant's material breach excused any subsequent breach

by the Army in not paying for line haul servicers furnished it. Appellant opposes the

Army's summary judgment motion contending: the Army has made no showing the

2008 fraud had any connection with services provided in 2009; case law does not

permit this Board to make broad, adverse inferences against appellant allowing the

Army to escape over $3 million in liability; and the Army therefore has failed to "carry

its burden on summary judgment."

STATEMENT OF FACTS FOR PURPOSES OF THE MOTION

Between 2006 and 2010, the United States maintained and operated a base

known as Bagram Airfield in Afghanistan. The United States Departments of the Air

Force and Army were responsible for different aspects of base operations. The Army

supervised all "Host Nation Trucking," i.e., bringing of deliveries to and from Bagram,

through the airfield's Transportation Operations Support Office (TOSO). The Army

assigned both military officers and contract employees to TOSO to review requests it

received for transportation and assign days of trucking services to companies based on

a company's performance record, i.e., whether that company was furnishing adequate

service-timely delivery and protection of deliveries from pilfering, among other

things. If a company failed to provide adequate service, TOSO could penalize that

company by removing it from the trucking schedule and awarding its work days to

others. Rates paid to a company varied by trip and were based on the type of truck

required, cargo transported, and distance traveled. (R4, tab 27 at 13-14, tab 29)

There were nine Afghan trucking companies working at Bagram (R4, tab 27

at 13). The Army issued a trucking company a BPA providing that: a contracting

officer (CO) will provide that company with a listing of individuals authorized to place

"calls" to trucking companies for line haul services; the company shall submit invoices

for services it has provided in response to calls and not charge any amount in excess of

charges set forth on a service "Price List;" and the company may terminate its

participation in providing such services to the Army by submitting a written notice 30

calendar days prior to date of the proposed termination (e.g., R4, tab 1 at 2, 12; compl.

~ 12).

The basic procedure for acquiring trucking services was that the Army would

issue a "BPA Call" and then issue pursuant to that Call a number of Transportation

Movement Requests (TMRs) directing pick-up of specific cargo at a specified location

and its delivery to another specified location. Once cargo was offloaded at destination,

the military unit receiving it would sign, stamp or by other means document its receipt

on the TMR issued. A CO's Representative (COR) later verified deliveries had been

made by reconciling trucking company monthly delivery records with receiving or

verification records. Following Army confirmation of delivery, a trucking company

would invoice the Army for its services. (Compl. ~~ 12-14, 16-21, ex. D)

Appellant, Afghanistan Trade Transportation Co., Ltd. (ATT), is an Afghan

trucking company that entered into a BPA, No. W91B4N-06-A-0069, in

September 2006 regarding provision of line haul services, i.e., the transport of

containerized dry goods, heavy equipment, and bulk fuels by overland truck convoy

(R4, tabs 1, 27 at 14; compl. ~~ 2, 5, 11). While the initial period of the BPA was

1September2006 through 31August2008, the BPA's term was extended by mutual

agreement (bilateral modifications) through October 2009 (R4, tab 1 at 2, tabs 5, 7, 9;

compl. ~ 11, ex. C).

On or about 10 February 2008, the Army assigned SSG James Paul Clifton

to be the COR at TOSO responsible for the trucking service BP As. One of the nine

trucking companies possessing a BPA at Bagram, Afghan International Trucking

(AIT), began paying SSG Clifton a bribe of $20,000.00 a month for preferential

treatment. AIT was the only trucking company besides A TT that was willing to make

pickups and deliveries in parts of Afghanistan deemed very dangerous (R4, tabs 3-4).

In May of 2008, A TT entered into an illegal agreement with SSG Clifton similar to the

one he had with AIT by which it paid him bribes of $15,000.00 a month in exchange

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for assigning it an extra day of trucking service per month. Between 10 May 2008 and

18 October 2008, ATT sent from Dubai, United Arab Emirates, to Clifton's then

girlfriend in Newport News, Virginia, by Western Union wire transfer service

approximately $35,000.00 in payments. (R4, tab 27 at 14-15, tab 29)

From April through December of 2008, Diyana Montes worked for Kellogg,

Brown & Root (KBR), a private contractor at Bagram Airfield, receiving TMRs from

companies providing trucking services, reconciling any discrepancies between the

amount of services described in the TMRs and amount of services the contractors

claimed in their invoices, and after determining the invoices to be accurate passing

them along to Army officials who relied upon her review in authorizing payment of

the invoices (R4, tab 30). On numerous occasions from May 2008 through

December 2008, Ms. Montes received and reviewed TMRs and invoices for services

allegedly provided by A TT that fraudulently represented A TT provided services

Ms. Montes knew were not in fact performed and she passed them along for payment

with the knowledge the billings were fraudulent in exchange for A TT paying to her

$50,000.00, consisting of $35,000.00 wired to her personal bank account in the U.S.

and another $15,000.00 in cash paid to her on several occasions in Afghanistan (id.).

SSG Clifton pied guilty in August 2009 to one count of bribery for accepting

bribes from AIT and A TT in exchange for providing them with preferential treatment

(R4, tab 29). Ms. Montes pled guilty in October 2012 to bribery charges for her role in

the scheme to fraudulently bill the Army for trucking services in Afghanistan (R4,

tab 30). AIT pied guilty in June 2010 to one count of bribery with respect to

$120,000.00 in payments it made to SSG Clifton and two others at TOSO, and agreed

to pay fines totaling $3 .36 million (R4, tab 29). ATT also pled guilty in June 2010 to

one count of bribery with respect to the payments it made to SSG Clifton, and agreed

to pay fines totaling $1.04 million (R4, tabs 27-29).

On 6 February 2009, the Army's CO appointed Kathleen McMahan as COR for

the trucking service BPAs in Afghanistan (R4, tab 10). Unlike the Army appointment

of SSG Clifton, COR McMahan's appointment contained two paragraphs outlining the

COR "shall conduct business dealings with industry in a manner above reproach in

every aspect and shall protect the U.S. Government's interest, as well as maintain its

reputation for fair and equal dealings with all contractors" (compare id. with R4,

tab 3).

ATT asserts that between 9 February and 27 April 2009 it received 37 TMRs

pursuant to its BPA to make heavy equipment deliveries during the U.S. force surge

that were not reconciled or paid for by the Army (compl. iii! 92-96, 99). It further

asserts it received 610 TMRs pursuant to its BPA for trucking services between 1 May

and 29 September 2009 that were never paid for by the Army (compl. iii! 35-91,

101-02). According to an ATT representative, this period of time was chaotic

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"throughout the theater" due to: the Army's troop surge preceding the Afghan

election; resulting security curfews; and widespread courier route closures. The

representative added:

[O]fthe 64 fuel truck deliveries destine[d] for FOB

Bostick, 30 of those tanker trucks were lost to hostilities.

In just four days between 13 and 16 August 2009 A TT lost

18 tanker trucks in support of the 61 st Cavalry Regiment at

FOB Bostick. Despite repeated convoy attacks, driver

casualties and loss of trucks, ATT literally went "above

and beyond the call" in its attempts to resupply FOB

Bostick and the 61 st Calvary Regiment.

(R4, tab 35 at 3)

About three years later, ATT's Finance Manager advised the Army by letter as

follows:

On behalf of the owners of ATT and myself, may we take

this opportunity to personally and sincerely apologize to

the members of the Bagram Contracting Center for past

misdeeds and lapse in judgment. On 24 June 2010, ATT

satisfactory resolved all remaining issues with presiding

U.S. federal authorities.

He further advised that A TT wished to obtain completion of TMR reconciliation

and closeout with respect to the trucking services BPA, and appended documentation

related to reconciliation. (R4, tab 31) Thereafter, for about 18 months, ATT and the

Army exchanged correspondence concerning reconciliation (R4, tabs 32-35; compl.

~ 4, exs. F, G). By letter dated 26 August 2014, the BPA's new Army CO located in

Rock Island, Illinois, advised ATT "[i]fyou wish for us to consider payment on your

submitted invoice[s], you will need to certify your claim IA W Far Part 33" (R4,

tab 36).

On 25 September 2014, A TT submitted to the CO a properly certified claim for

$3,367,445.65 for 647 TMRs or instances between 9 February and 29 September 2009

that it had furnished the Army trucking services under the BPA (R4, tab 37). About

six weeks later, on 17 November 2014, the CO issued a final decision denying ATT's

claim because "ATT has failed to provide supporting documentation for their certified

invoices," i.e., claim (R4, tab 39).

ATT timely appealed the CO's final decision to this Board. After ATT filed its

complaint in this appeal, the Army filed a motion for summary judgment in lieu of an

answer to the complaint.

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DECISION

The standards set forth in FED. R. CIV. P. 56 guide us in resolving a summary

judgment motion. J. W. Creech, Inc., ASBCA Nos. 45317, 45454, 94-1 BCA ~ 26,459

at 131,661; Allied Repair Service, Inc., ASBCA No. 26619, 82-1BCA~15,785

at 78,162-63; Board Rule 7(c)(2). We will grant a summary judgment motion only if

pleadings, depositions, interrogatory answers, and admissions on file, together with

any affidavits or other evidence, show that there is no genuine issue as to any material

fact, and that the moving party is entitled to judgment as a matter of law. The Army,

the party here seeking summary judgment, has the burden of demonstrating both of

these elements. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Mingus

Constructors, Inc. v. United States, 812 F.2d 1387, 1390 (Fed. Cir. 1987); Comptech

Corp., ASBCA No. 55526, 08-2 BCA ~ 33,982 at 168,082. ATT, who is the

non-moving party, is entitled to have all reasonable inferences drawn in its favor.

Celotex Corp., 477 U.S. at 322-24; Elekta Instrument S.A. v. 0. U.R. Scientific Int'/,

Inc., 214 F.3d 1302, 1306 (Fed. Cir. 2000).

In seeking summary judgment, the Army contends A TT "perpetrated the first

material breach of the contract" at issue by violating its contractual duty of good faith

and fair dealing, and any "subsequent government breach" by the Army in not paying

for contract services later provided by A TT is thus "excused." According to the Army,

a holding otherwise would "ignore[] the [legal] doctrine of first material breach." The

Army asserts that there are no material facts in dispute here that would preclude our

grant of its summary judgment motion because A TT does not deny "the fact" it bribed

Ms. Montes and SSG Clifton during 2008, "bribery is fraud," and fraud is "by

definition" a "material" breach of contract. (Gov't reply br. at 1-2, 6)

A TT asserts the Army's summary judgment motion should be denied because

the Army has not met its burden of showing any of the 2009 calls issued were affected

by fraud (app. opp'n at 2-3). ATT additionally asserts the Army has waived its

defense of "first material breach" with respect to trucking services A TT provided to

the Army between February and September 2009 (id. at 3-4). ATT states, "The

Government offers no factual, legal, or policy reason why it should be allowed to keep

the benefit of over $3 million dollars in deliveries [ATT made during 2009] without

offering any proof' that the 2009 deliveries/TMRs under the BPA were affected by

fraud (id. at 4).

The Army is correct that, when a party to a contract is sued for breach, it may

ordinarily defend on the ground that there existed at the time of breach, a legal excuse

for nonperformance. Christopher Village, L.P. v. United States, 360 F .3d 1319, 1334

(Fed. Cir. 2004), cert. denied, 543 U.S. 1146 (2005) (citing College Point Boat Corp.

v. United States, 267 U.S. 12, 15 (1925)). As the U.S. Court of Appeals for the

Federal Circuit has explained, courts often impose liability on the party that committed

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the first material breach of contract based on the principle that, if performances are to

be exchanged under an exchange of promises, each party is entitled to assurance that

he will not be called on to perform his remaining duties if there already has been an

uncured material failure of performance by the other party. Christopher Village, 360

F.3d at 1334 (citing RESTATEMENT (SECOND) OF CONTRACTS§ 237, cmt. B (1981)).

The Army is also correct that every contract contains a covenant between the

parties to perform in good faith and fair dealing, and a failure to fulfill this duty is a

breach of contract. Laguna Construction Co., ASBCA No. 58324, 14-1 BCA

if 35,748 at 174,948 (citing Metcalf Constr. Co. v. United States, 742 F.3d 984, 990

(Fed. Cir. 2014)). This principle long has been applied to contracts entered into by

private parties and the Federal government. Precision Pine & Timber, Inc. v. United

States, 596 F.3d 817, 828 (Fed. Cir. 2010), cert. denied, 562 U.S. 1178 (2011); Malone

v. United States, 849 F.2d 1441, 1445-46 (Fed. Cir. 1988).

Finally, the Army is correct that it is well established any degree of fraud is

"material" as a matter oflaw. Christopher Village 360 F.3d at 1335; Joseph

Morton Co. v. United States, 757 F.2d 1273, 1278 (Fed. Cir. 1985). Binding precedent

"underscores the necessity for the Government to be secure in its confidence in its

contractors." Christopher Village, 360 F.3d at 1335 (quoting Joseph Morton Co.,

757 F.2d at 1278).

The Army errs, however, in treating ATT as having entered into only "one

contract" for the provision of trucking services to the Army in Afghanistan, i.e., the

2006 BPA. BPAs generally are held not to be a "contract." Rather, they usually are

"characterized as frameworks for future contracts - 'a set of ground rules as it were."'

Under most BPAs, no obligations are assumed by either party until orders are given by

the government and accepted by a contractor. A "contract" generally is formed only

when the contractor accepts a specific government order. E.g., Crewzers Fire Crew

Transport, Inc. v. United States, 741F.3d1380, 1381 (Fed. Cir. 2014) (quoting

Modern Sys. Tech. Corp. v. United States, 979 F.2d 200, 204 (Fed. Cir. 1992));

accord Comptech Corporation, 08-2 BCA if 33,982 at 168,082; FAR 13.302-3(a);

FAR 13.303-l(a); FAR 16.703.

Based upon the limited materials referenced in the Army's summary judgment

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motion, it appears that the Army was not required to place any orders with ATT (R4,

tab 27 (Army assigned days of service based upon its determination of a company's

record of performance and was free to remove a company from schedule of trucking

service providers)), and ATT was not required to accept orders (see R4, tab 4 (some

BPA trucking companies declined to provide service for the most dangerous parts of

Afghanistan), tab 1at2 (the contractor may opt out ofBPA)). The 2006 BPA at issue

here therefore appears to reflect illusory promises not imposing obligations on either

party. To be valid and enforceable, a contract must have both consideration and

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t

sufficient definiteness. Ace-Federal Reporters, Inc. v. Barram, 226 F.3d 1329, 1332

(Fed. Cir. 2000). Our court of appeals has held that, "[i]t is axiomatic that a valid

contract cannot be based upon the illusory promise of one party, much less illusory

promises of both parties." Crewzers Fire Crew, 741 F.3d at 1382-83 (quoting Ridge

Runner Forestry v. Veneman, 287 F.3d 1058, 1062) (Fed. Cir. 2002)). Accordingly, it

appears that contracts arose between A TT and the Army with respect to provision of

trucking services only when A TT accepted specific Army orders (TMRs) issued for

such services.

All of the TMRs disputed in this appeal were issued during 2009 (comp!. ii 2)

and accepted by ATT during 2009 (compl. iii! 36-102). The covenants between the

parties to perform those 2009 contracts in good faith and fair dealing therefore also

arose in 2009 (compl. ~~ 2, 36-102). All of the actions the Army relies on here in its

summary judgment motion as constituting breaches of A TT's covenant to perform in

good faith and fair dealing (bribery of SSG Clifton and Ms. Montes) occurred during

2008 with respect to contracts entered into during 2008 or earlier, before the parties'

2009 contracts and covenants of good faith and fair dealing ever came into existence.

While the Army has shown here A TT materially breached its covenants of good faith

and fair dealing with respect to performance of the parties' 2008 contracts, the Army

has not shown ATT materially breached the covenants of good faith and fair dealing

arising from the parties' 2009 contracts at issue in this appeal prior to the Army's

alleged breach of those 2009 contracts. The Army, therefore, has failed to show it is

entitled to judgment as a matter of law and carry its burden with respect to grant of

summary judgment.

CONCLUSION

For reasons stated above, we deny the Army's motion for summary judgment.

The Army shall file its answer to ATT's complaint here within 45 days of the date of

this decision.

Dated: 18 August 2015

-/~L)~

TERRENCES.HARTMAN

Administrative Judge

Armed Services Board

of Contract Appeals

(Signatures continued)

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I concur I concur

/~~--~ v~/

~~~~~--- RICHARDSHXCKLEFORD

Administrative Judge Administrative Judge

Acting Chairman Vice Chairman

Armed Services Board · Armed Services Board

of Contract Appeals of Contract Appeals

I certify that the foregoing is a true copy of the Opinion and Decision of the

Armed Services Board of Contract Appeals in ASBCA No. 59782, Appeal of

Afghanistan Trade Transportation Co., Ltd., rendered in conformance with the Board's

Charter.

Dated:

JEFFREY D. GARDIN

Recorder, Armed Services

Board of Contract Appeals

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