Leviathan Corporation

ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeal of -- )

)

Leviathan Corporation ) ASBCA No. 58659

)

Under Contract No. DAB VO 1-03-D-OOO 1 )

APPEARANCES FOR THE APPELLANT: David S. Black, Esq.

Gregory R. Hallmark, Esq.

Holland & Knight LLP

Tysons Comer, VA

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

Army Chief Trial Attorney

CPT Jessica E. Edgell, JA

Trial Attorney

OPINION BY ADMINISTRATIVE JUDGE O'CONNELL ON THE

GOVERNMENT'S MOTION TO DISMISS FOR LACK OF JURISDICTION

This matter is before us on the government's motion to dismiss for lack of

jurisdiction. We deny the motion.

STATEMENT OF FACTS FOR PURPOSES OF THE MOTION

This appeal involves a contract awarded by the Coalition Provisional Authority

(CPA) in Iraq to appellant's predecessor, Trident International, dated 29 October 2003

(R4, tabs 1, 4, 52). The Rule 4 file contains only a barely legible copy of the first page

of the contract. A contracting officer for the United States Air Force signed the

contract and issued six delivery orders (R4, tabs 52-57). Appellant fulfilled its

duties under the contract, delivering various items of clothing that were accepted by

United States military personnel (see id. and tab 3 7).

On 28 June 2004, the CPA dissolved and transferred power to the Iraqi Interim

Government. On 30 January 2005, the same date elections were held to choose

representatives for the newly formed Iraqi National Assembly, power transferred to the

Iraqi Transitional Government. The Iraqi people ratified the Constitution of Iraq by a

referendum on 15 October 2005, and on 20 May 2006 the permanent Iraqi government

took office. Harris v. Kellogg, Brown & Root Services, Inc., 796 F. Supp. 2d 642, 649

(W.D. Penn. 2011) (citing Kalasho v. Republic of Iraq, 2007 WL 2683553, at *6

(E.D. Mich., Sept. 7, 2007)). The government has provided us with a grant of authority

by Ali Abdul Amir Allawi, Iraq Minister of Finance, dated 24 December 2005 that

extended administration by the Commander, Multi-National Force-Iraq (MNF-I), of

contracts funded by the Development Fund for Iraq* (DFI) until 31 December 2006

(gov't mot., ex. 7).

At some point, appellant began experiencing difficulties in obtaining payment

for the furnished goods. On 13 November 2006, appellant emailed a Defense Contract

Management Agency contracting officer, LT Paul Fox, USN, requesting help in

obtaining payment (R4, tab 9). LT Fox analyzed the problem and calculated that the

difference between the value of delivered goods and payments documented in the file

was $1,221,701.41 (R4, tab 10 at 23-25). In an email to appellant on 25 November

2006, LT Fox observed that "US Government administration" of CPA contracts would

end on 31 December 2006 and stated that he was enclosing a "settlement modification."

He further stated "This is the final offer I can make on behalf of both the Iraqi and

US Governments." (R4, tab 9)

This Modification, No. A00002, provided for "payment of $254,903.92 to be

made by the Government of Iraq utilizing [DFI] funds" (R4, tab 6 at 14). The

modification went on to state that it "constitutes a full release and accord between

Trident International (DBA: Leviathan Corporation), the Government of Iraq, and the

United States Government." It further stated that no "future deliveries against these

delivery orders [will] be accepted by the Government of Iraq and the United States

Government." Finally, it stated that upon execution of the modification, the Joint

Contracting Command-Iraq would forward a final payment package to "the payment

office." (Id.)

At his deposition, now LCDR Fox testified that after execution of the

modification, he submitted the payment package to the MNF-I Finance Office, which

certified the payment and forwarded it to the Iraqi Ministry of Finance (R4, tab 79

at 27). For reasons that are not clear, appellant did not receive payment. For nearly

five years appellant inquired about the payment with constantly changing government

personnel to no avail. (R4, tabs 12-42)

In 2011, the Army Contracting Command in San Antonio, Texas, made another

effort to resolve this matter and on 7 September 2011 a different contracting officer and

* The United Nations and the CPA established the DFI to hold various funds for

Iraq's reconstruction needs, including (i) deposits from surplus funds in the

United Nations "Oil for Food" program, (ii) revenues from export sales oflraqi

petroleum and natural gas, (iii) international donations, and (iv) repatriated Iraqi

assets seized by the United States and other nations. See United States ex rel.

DRC, Inc. v. Custer Battles, LLC, 376 F. Supp. 2d 617, 26 (E.D. Va. 2005) rev'd

in part on other grounds and remanded, 562 F.3d 295 (4th Cir. 2009)).

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appellant signed Modification No. P0004, in which the U.S. Government once again

promised to pay appellant $254,903.92 (R4, tab 7 at 16). This modification stated that

the settlement would be funded from "seized assets and vested funds of the former Iraqi

regime" (id. at 17). Despite this apparent control of the settlement money, the

government again failed to come through with the payment. Over the next 12 months,

appellant repeatedly inquired about the status of payment but the government

transferred the file to the Army Contracting Command - Rock Island; personnel at this

office told appellant that the matter was under review (R4, tabs 43-49). On 6 May 2013

a contracting officer at Rock Island issued a final decision stating that "[t]he

information provided to the government in support of your claim has been sparse and

we are unable to process the claim due to the poor quality of documentation provided

and several potential irregularities" (R4, tab 8). The contracting officer did not mention

the signed, bilateral, modifications, nor did she state that the government was not

paying because the U.S. Government was not a party to the contract. The decision

contained the standard language informing appellant that it could appeal to the Board or

file suit in the Court of Federal Claims. (Id.)

DECISION

Under the Contract Disputes Act, 41 U.S.C. §§ 7101(8), 7102(a), the Board

possesses jurisdiction to consider appeals on contracts awarded by executive

agencies. In general, an appellant need only make a non-frivolous allegation of a

contract with an executive agency to establish our jurisdiction. Engage Learning, Inc.

v. Salazar, 660 F.3d 1346, 1353 (Fed. Cir. 2011). The government relies on our

decisions in MAC International FZE, ASBCA No. 56355, 10-2 BCA ii 34,591 (MAC I)

and MAC International FZE, ASBCA No. 56355, 13 BCA ii 35,299 (MAC II), in which

we held that we lacked jurisdiction to consider claims on contracts awarded by the CPA

because the CPA was an international entity, not an executive agency of the United

States.

Appellant does not challenge our MAC decisions. Rather, it contends

that the U.S. Government became a party to the contract through Modification

No. A00002. As we found above, in proposing this modification, the contracting

officer stated, in part, that he was making an offer on behalf of the U.S. Government.

The contracting officer inserted language in the modification in which appellant

released its claims against the United States. Appellant contends that once the

United States became a party to the contract, it could be held liable for the failure to

pay.

Appellant's argument is novel, but this was an unusual situation given

the sui generis nature of the CPA and the management of its contracting functions

by U.S. Government personnel. As the Federal Circuit explained in Engage Learning,

"a dispute over the scope of an acknowledged contract [and] the determination of

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whether or not a contract in fact exists is not jurisdictional; it is a decision on the

merits." Engage Learning, 660 F.3d at 1355. Thus, for purposes of the present motion,

we need not decide whether the parties established a contractual relationship between

the United States and appellant, only whether appellant has made a non-frivolous

allegation of such a relationship.

To demonstrate that it entered into a contract with the United States, a merits

issue, appellant must show a mutual intent to contract, including an offer, acceptance,

and consideration, and that the government official who entered or ratified the contract

had actual authority to bind the government. Trauma Service Group v. United States,

104 F.3d 1321, 1325 (Fed. Cir. 1997). The government agrees that LT Fox was a

contracting officer and does not otherwise challenge his authority to act on behalf of the

United States. Appellant has produced evidence that LT Fox stated in his 25 November

2006 email that he was making an offer on behalf of the governments oflraq and

the United States, which appellant accepted by signing the tendered Modification

No. A00002. .

Appellant has alleged that the United States received consideration because

appellant released all of its claims against the United States. While that release may not

seem to be worth much given our subsequent rulings in MAC I & II that the

United States is not responsible for the unpaid contracts of the CPA, that is not the way

such things are evaluated. Forbearance of a claim can be consideration if the forbearing

party believed in good faith at the time that its claim is valid. This is so even if a court

later finds otherwise. Road and Highway Builders, LLC v. United States, 702 F .3d

1365, 1368, 1370 (Fed. Cir. 2012) (citing RESTATEMENT_(SECOND) OF CONTRACTS

§ 74 cmt. b (1981)). There is no suggestion that appellant acted in bad faith.

Based on this analysis, we hold that appellant has met the standard for

establishing Board jurisdiction under Engage Learning. Specifically, it has made

non-frivolous allegations of an offer, acceptance, consideration, and contracting

authority. We are not deciding whether appellant has proven the existence and breach

of a contract for which it is entitled to relief. These are merits determinations.

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CONCLUSION

The government's motion is denied.

Dated: 12 May 2016

n1~Uroo~

MICHAELK O'CONNELL

Administrative Judge

Armed Services Board

of Contract Appeals

I concur I concur

MARK N. STEMPLER // CKLEFORD

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. 58659, Appeal of Leviathan

Corporation, rendered in conformance with the Board's Charter.

Dated:

JEFFREY D. GARDIN

Recorder, Armed Services

Board of Contract Appeals

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