Freedom Systems, LLC

ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeal of -- )

)

Freedom Systems, LLC ) ASBCA No. 59259

)

Under Contract No. W912C6-12-C-0005 )

APPEARANCE FOR THE APPELLANT: Mr. Reginald B. McFadden

President & CEO

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

Army Chief Trial Attorney

CPT Ahsan M. Nasar, JA

Trial Attorney

OPINION BY ADMINISTRATIVE JUDGE THRASHER ON THE

GOVERNMENT'S MOTION FOR SUMMARY JUDGMENT

Appellant, Freedom Systems, LLC (Freedom), appealed a contracting officer's

final decision (COFD) denying appellant's sponsored claim of its subcontractor

Wyndham Hotel Management, Inc. (Wyndham), in the amount of $820,800.00 in

cancellation fees. The government asserts Wyndham provided appellant and the

government a written release fully releasing appellant from any claims Wyndham

might pursue against appellant related to the contract. Therefore appellant's appeal is

barred by the Severin doctrine, entitling the government to a judgment as a matter of

law. Freedom opposes the motion. We grant the government's motion.

STATEMENT OF FACTS (SOF) FOR PURPOSES OF THE MOTION

1. On 10 November 2011, the Army Reserve Contracting Center - Fort Jackson,

South Carolina (government), awarded Contract No. W912C6-12-C-0005 to Freedom to

provide support services for eight Yell ow Ribbon Reintegration Programs (Events)

scheduled to occur between 18 November 2011 and 16 September 2012 (R4, tab 1 at 1,

13 ). The Yellow Ribbon Events are Congressionally mandated programs that assist

National Guard and Reserve Soldiers and their families in transitioning back to civilian

life from a military deployment (mot. ii 2).

2. On 5 December 2011, Freedom entered into a Hotel Group Event Agreement

with Wyndham (R4, tab 7 at 12). The agreement included a cancellation clause permitting

Freedom to cancel a scheduled event upon providing notice to Wyndham prior to the

scheduled event and payment of $136,800.00 per each canceled event (id. at 8).

3. The government held the contracted events in Orlando, Florida, from

November 2011 to September 2012 (R4, tab 1 at 13; app. resp. to answer ii 16). On

9 January 2012, the contracting officer (CO) informed Freedom of numerous

complaints received regarding the poor quality of services offered at the Wyndham

Orlando Resort during the December 2011 event and asked Freedom to propose a new

hotel for the remaining events (R4, tab 9). Thereafter, on 23 January 2012, the

contract administrator informed Freedom that the customer had decided to reschedule

the February 2012 event to 27-29 April 2012 and had "decided on the Rosen for all

trips" (R4, tab 14 at 1).

4. By email, on 25 January 2012, appellant confirmed that it was able to accommodate

the change in venue and the new date (R4, tab 16 at 1).

5. Freedom completed performance of the remaining events by 30 September

2012 (app. resp. to answer ii 16).

6. On 31July2013, appellant submitted a claim in the amount of$820,800.00

stating:

[T]his claim [is] for payment of subcontract

cancellation damages to Wyndham pursuant to the

"Cancellation Policy" provision of the committed

subcontracts executed in the performance of the prime

contract W912C6-12-C-0005.

Freedom Systems, LLC is the interested party filing the

claim. Freedom Systems, LLC is the prime company

supporting execution of the subject contract.

(R4, tab 22 at 2)

7 .. On 11 September 2013, the CO informed Freedom that its claim was not

properly certified as required for claims over $100,000.00 (R4, tab 24 at 1). Freedom

resubmitted its claim with accompanying certification on 11 September 2013 (R4,

tab 25 at 3).

8. The CO issued a COFD denying Freedom's claim on 21 January 2014 (R4,

tab 26). Freedom timely appealed the COFD to the Board on 11 April 2014 (R4,

tab 27 at 1).

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9. Freedom filed its complaint on 8 May 2014 asserting the basis for its appeal,

as follows:

10. Government breached the contract when

Appellant was directed to change venue by the

Government despite our contractual obligation with the

Wyndham. The Government was fully aware of these

obligations but directed a change of venue despite such

knowledge or necessity for a contract change to

implement. At no time did the Appellant agree to release

the Government from any and all liability under the

contract for further equitable adjustments attributable to

this change. Given that no contract modification was

executed, Appellant was still under obligation to utilize

the Wyndham in execution of the contract and had no

standing to mitigate any subcontract damages with

Wyndham. Conversely, Appellant can find no contractual

requirement or obligation to notify Wyndham for

mitigation of damages to reduce the claim as implied by

the Government.

11. Given that there was no termination,

Appellant is not seeking liquidated damages resulting

from termination of the contract as referred to by the

government. Appellant is however seeking claims and

equitable adjustments under FAR 52.212-4, Paragraph d.

Disputes, for damages resulting from the breach of contract

per item 9.

12. Given that there was no termination, the

Appellant asserts that it complied with all contract terms

and conditions, and provided the Government, upon

request, with adequate assurances of future performance.

Where deficiencies were cited by the Government,

Appellant provided satisfactory corrective actions and

remedies.

13. On September 11, 2013, Appellant submitted a

certified claim and request for a contracting officer's

final decision in the amount of $820,800.00. Appellant

has and will submit documentation from Wyndham

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compelling the Appellant to pay these amounts upon

request by the Government or the Board pursuant to

ASBCA Rule 14 or Rule 15 requests or actions.

(Compl. ilil 10-13)

10. On 14 July 2014, Freedom provided the government a copy of a letter

dated 1March2012 that Freedom represented it had received from Wyndham's

outside counsel. The letter asserted a claim of $820,800.00 against Freedom and

threatened suit should Freedom fail to pay. Freedom also informed the government

that Wyndham delayed filing a suit against appellant pending the outcome of its claim

against the government. (App. resp. to answer il 22)

11. Ms. Jennifer E. Constantinou, Vice President-Legal of Wyndham,

executed a general release to Freedom on 21 April 2015 releasing any and all claims

against Freedom related to Freedom's claim against the government, as follows:

Wyndham Hotel Management, Inc., its agents,

officers, parent corporations, employees, directors,

servants, shareholders, representatives, predecessors,

successors, heirs, executors, administrators and all other

persons, firms, corporations, subsidiaries, affiliates,

associations, partnerships, and the predecessors, successors

and assigns of any of them (collectively, "Wyndham"),

hereby fully and forever releases and discharges Freedom

Systems, LLC ("Freedom") of and from any and all claims,

actions, causes of action, demands, rights, costs, loss of

service, expenses and compensation whatsoever, which

the undersigned now has/have or which may hereafter

accrue on account of or in any way growing out of

Freedom's contract with the U.S. Army, Contract

No. W912C6-12-C-0005 (or any contract related thereto)

which form the basis for Freedom's appeal to the Armed

Services Board of Contract Appeals ("ASBCA"),

docketed as ASBCA No. 59259. Wyndham remises,

releases, and discharges Freedom and Freedom's officers,

agents, and employees, of and from all civil liabilities,

obligations, claims, appeals, and demands which

Wyndham has or may have, whether known or unknown,

administrative or judicial, legal or equitable, including

attorney's fees, arising under or in any way related to

Contract No. W912C6-12-C-0005 or the disputes which

form the basis of ASBCA No. 59259.

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The undersigned further declare(s) and represent(s)

that no promise, inducement or agreement not herein

expressed has been made to the undersigned, and that the

terms of this Release are contractual and not a mere recital.

This Release and any party that succeeds to the

rights and responsibilities of a party, such as predecessors,

successors and assigns shall be bound by the terms and

conditions of this Release.

This Release constitutes the entire understanding

and agreement of Wyndham respecting the resolution of

this action. This Release may not be changed or modified.

The undersigned represents that she has the

authority to bind Wyndham.

(Mot., ex. G-1)

DECISION

Summary judgment is appropriate when there is no genuine issue of material

fact and the moving party is entitled to judgment as a matter of law. Anderson v.

Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). When considering a motion for

summary judgment, the Board's function is not to weigh the evidence and determine

the truth of the matter but to determine whether there is a genuine issue for trial. Id.

at 249. The moving party bears the burden of establishing the absence of any genuine

issue of material fact and all significant doubt over factual issues must be resolved in

favor of the party opposing summary judgment. However, the party opposing

summary judgment must show an evidentiary conflict on the record; mere denials or

conclusory statements are not sufficient. Mingus Constructors, Inc. v. United States,

812 F.2d 1387, 1390-91 (Fed. Cir. 1987).

The government contends Wyndham's 21April2015 general release provides

the government with sufficient basis to invoke the Severin doctrine entitling the

government to judgment as a matter of law (gov't mot. at 3). The Severin doctrine,

which is taken from Severin v. United States, 99 Ct. Cl. 435 (1943), cert. denied, 322

U.S. 733 (1944), is based upon the principles of sovereign immunity and privity of

contract. It generally precludes a prime contractor from sponsoring a subcontractor

claim against the government if the prime contractor is not liable to the subcontractor

for the costs or damages in question. Severin, 99 Ct. Cl. at 442-44. Later precedent

has narrowed the Severin doctrine clarifying that the doctrine is narrowly construed

and the government bears the burden of showing the Severin doctrine applies. E.R.

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Mitchell Construction Co. v. Danzig, 175 F.3d 1369, 1371 (Fed. Cir. 1999). As

applied to releases, the government must show an unconditional iron-clad release that

clearly protects the contractor from any and all liability to the subcontractor for the

conduct in question. MA. Mortenson Co., ASBCA No. 53761, 06-1BCAii33,180

at 164,439 (government must establish an iron-clad release); E.R. Mitchell, 175 F.3d

at 1371; WG. Yates & Sons Construction Co. v. Caldera, 192 F.3d 987, 990-92 (Fed.

Cir. 1999) (allowing prime contractor sponsorship in instances where the prime

contractor is only conditionally liable to the subcontractor for whatever it can recover

from the government).

Appellant asserts three reasons why the Severin doctrine does not apply to the

facts of this appeal. First, appellant argues, "Neither the Government nor Wyndham

have provided guarantees or proof of any iron clad release sufficiency.... Because

there is no validation of the release, Appellant asserts it (the Prime) remains liable to

the subcontractor on the claim based upon the subcontract provisions provided as

material facts under the appeal." (App. opp'n at 3) We disagree. Wyndham has

provided appellant with an iron-clad general release that clearly protects appellant

from any and all liability to Wyndham for appellant's conduct regarding the contract.

Specifically, Wyndham's release "fully and forever" releases appellant from any all

claims, causes of action, or variations that Wyndham currently has or may later have

against appellant pertaining to appellant's contract with the government or this

contract appeal. Wyndham's release is on behalf of its agents and subsidiaries to

include the Wyndham Orlando Resort. Additionally, Wyndham's release is not

conditional nor does it have limited time applicability. Wyndham's release applies to

appellant, its agents, and its officers acting in an official capacity for appellant.

Wyndham's release also clarifies that it did not receive consideration from either the

government or appellant for granting its release against appellant. Furthermore,

Wyndham's release indicates that it received no inducement to provide this release to

appellant. Wyndham's release also binds its successor and is applicable to appellant

and its successors. (SOF ii 11) The release was also executed by an officer of

Wyndham with authority to bind the company (id.). Consequently, appellant can rely

upon this release as an unconditional iron-clad shield from further liability to

Wyndham related to the contract or the underlying issues of this claim.

Second, appellant asserts the Severin doctrine does not bar its appeal because

appellant's claim is not based upon its liability to its subcontractor but rather based

upon a government breach of contract with the prime which caused the prime to incur

damages from one of its subcontractors. The damages occurred when the government

changed the event locations and dates but never memorialized the changes by

modifying the contract. (App. opp'n at 4) The record before us on the motion

establishes appellant's claim is, in fact, appellant's sponsorship of Wyndham's claim.

Appellant's argument contradicts the only asserted rationale for its claim which was its

liability to Wyndham under the subcontract agreement cancellation policy clause

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(SOF iI 6). In addition, the only stated basis for its claim articulated in its complaint is

its liability to Wyndham for cancellation of the events (SOF iI 9). Additionally, the

only damages appellant's claim asserts against the government are for the exact

amount that Wyndham would claim against appellant under the terms of their

subcontract agreement (SOF iI 10). Appellant has not presented any evidence

indicating an independent prime contractor claim and the record on the motion before

us is devoid of any such evidence.

And finally, appellant argues the Severin doctrine does not apply because of the

government's wrongful failure to issue contract modifications for the changes in venue

and time of events constituted a constructive contract termination of the subcontract

under the termination clause, stating:

Although Appellant's claim does not expressly seek

recovery on a "constructive convenience termination"

basis, Appellant may advance a legal theory on appeal

that was not expressly raised in the claim if it relates to

the same set of operative facts as the claim, which is the

case here, J & J Maintenance, Inc., ASBCA No. 50984,

00-1 BCA iI 30,784. Appellant['s] claim and resulting

appeal establishes that the Government constructively

terminated the prime and supporting contracts by its

breach. Appellant's liability to Wyndham could be

established under the Termination for Convenience clause

in the subcontract. Under such circumstances the

Severin doctrine clearly does not apply.

(App. opp'n at 5) To the extent appellant is arguing the government's actions

constructively terminated the prime contract, the facts in the record on this motion

contradict appellant's argument. Appellant completed all contracted events and there

is no evidence in the record on the motion before us supporting a constructive

termination of the prime contract (SOF iI 5). Additionally, appellant's complaint

contradicts this argument; appellant twice in its complaint stated there was no

termination (SOF iI 9). To the extent appellant is arguing the government's actions

constructively terminated Wyndham's subcontract, appellant has been released from

any and all liability to Wyndham for the government's actions by the general release

(SOF iI 11).

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CONCLUSION

We conclude appellant's sole claim is a subcontractor pass-through claim on

behalf of its subcontractor Wyndham, based upon its liability to its subcontractor as a

result of government actions. Because appellant's subcontractor, Wyndham, has fully

and unconditionally released appellant from any and all claims related to this contract,

we conclude appellant's claim is barred by the Severin doctrine. As a result, this

release falls within the Severin doctrine barring this appeal as a matter of law. The

government's motion for summary judgment is granted.

Dated: 3 September 2015

dministrative Judge

Armed Services Board

of Contract Appeals

I concur I concur

//1~ at-------~-~,.___--_ _

MARK N. STEMPLER"' RICHARD SHACKLEFORD

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. 59259, Appeal of Freedom

Systems, LLC, rendered in conformance with the Board's Charter.

Dated:

JEFFREY D. GARDIN

Recorder, Armed Services

Board of Contract Appeals

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