Jennings v. United States

In the United States Court of Federal Claims

No. 14-132 C

May 26, 2016

**************************************** Breach of Contract;

* Contracts of Adhesion;

TABETHA JENNINGS, * Due Process Clause;

* RESTATEMENT (SECOND) OF CONTRACTS

Plaintiff, * § 78 cmt. c (Unenforceable

* Promises);

v. * § 79 cmt. e (Effects of Gross

* Inadequacy);

* § 86 cmt. c (Unenforceable

THE UNITED STATES, * Contracts);

* 28 U.S.C. § 1491 et seq. (Tucker Act

Defendant. * Jurisdiction);

* 41 U.S.C. § 7102 et seq. (Contract

**************************************** Disputes Act).

James A. Simpson, Jr., Simpson & Simpson, Searcy, Arkansas, Counsel for Plaintiff.

Rebecca Sarah Kruser, United States Department of Justice, Washington, D.C., Counsel for the

Government.

MEMORANDUM OPINION AND ORDER DENYING THE GOVERNMENT’S

PENDING MOTIONS AND REQUIRING THE GOVERNMENT TO SHOW CAUSE

WHY THE COURT SHOULD NOT DETERMINE THAT SECTIONS C.2.10, C.3.1(6),

AND C.3.4(j) OF THE MARCH 9, 2012 CONTRACT ARE UNLAWFUL AND

UNENFORCEABLE

BRADEN, Judge.

I. RELEVANT FACTUAL BACKGROUND.1

On March 9, 2012, the United States Postal Service (“USPS”) renewed contract No. HCR-

726A1 (the “Contract”) with Ms. Tabetha Jennings to provide daily mail transportation services

The relevant facts discussed herein were derived from: Ms. Jennings’ July 21, 2014

1

Amended Complaint (“Am. Compl.”), the Exhibits attached to the Amended Complaint (“Am.

Compl. Exs. 1–8”); the Government’s November 13, 2015 Motion For Summary Judgment

(“Gov’t SJ Mot.”) and Appendix attached thereto (“Gov’t App. A1–77”); the Government’s

November 13, 2015 Proposed Findings Of Uncontroverted Fact (“GPFUF”); Ms. Jennings’

December 14, 2015 Response to the Government’s Motion For Summary Judgment (“Pl. Resp.”)

from Leslie, Arkansas to Timbo, Arkansas for $34,000 per year. Gov’t App. A1–48, A59; see also

Am. Compl. Ex. 1. Prior to that time, Ms. Jennings served seven years as a rural contract carrier

for the USPS without any issues related to her performance. Am. Compl. ¶¶ 4–5. On February

21, 2013, Ms. Jennings was terminated for “failure to perform in accordance with the terms of

[the] [C]ontract.” Gov’t App. A66.

A. The Contractual Provisions At Issue.

The Contract consisted of a thirteen page “Statement of Work and Specifications” that

prefaced thirty-five additional pages of boilerplate “Terms and Conditions.” Gov’t App. A1–48.

The Contract term was from April 1, 2012 to March 31, 2018. Am. Compl. ¶ 5. The provisions

relevant to the Memorandum Opinion And Order follow.

Section C.2.10 of the Contract provides that

[t]he supplier must have adequate contingency plans in place[,] should the use of

postal facilities be terminated or limited. In no event shall the [USPS] be held

liable for, or incur any additional cost associated with, such use or the termination

of such use during the contract term.

Gov’t App. A26 (emphasis added).

Section C.3.1(6) of the Contract provides that the USPS

may terminate this contract, or any part hereof, for default by the supplier, or if the

supplier fails to provide the [USPS], upon request, with adequate assurances of

future performance.

Gov’t App. A27.

Section C.3.4(j) of the Contract provides that

[t]he supplier must proceed diligently with performance of this contract, pending

final resolution of any request for relief, claim, appeal, or action arising under the

contract, and comply with any decision of the contracting officer.

Gov’t App. A32 (emphasis added).

In addition, Section C.3.8 of the Contract, provides, as a ground for termination for cause:

a. The supplier’s failure to perform service according to the terms of the contract[.]

Gov’t App. A34.

and the Appendix attached thereto (“Pl. App. A1–18”); and Ms. Jennings’ December 14, 2015

Response To Defendant’s Proposed Findings Of Uncontroverted Fact (“PRGPFUF”).

2

B. Relevant Facts.

On January 18, 2013, the Contracting Officer sent Ms. Jennings a letter denying her

“access to the mail and facilities . . . based on a disqualifying event in the course of contract

performance.” Am. Compl. Ex. 5. The Notice of Temporary Denial of Access stated that:

On January 18, 2013, you conducted yourself in an unprofessional manner and

disrupted the mail processing operations at the Leslie post office.

Consequently, I am temporarily denying you further access to the mails and all

Postal Facilities. This temporary denial of access is pending further investigation

in the matter and will remain in effect until you receive further correspondence

from this office. You are afforded an opportunity by notice of this letter to present

in writing any information that you believe to be material to this incident and would

like for me to consider when making my final decision in the matter. Any such

information is to be submitted to this office no later than Friday, January 25,

2013. You will be notified when a permanent decision has been made.

 If you have not already done so, you are instructed to return the drivers ID badge

to the Administrative Official.

 By copy of this letter, the US Postal Inspection Service is made aware of this

decision.

Despite the temporary denial of access to the mail, it is still your responsibility to

ensure that service is provided on this contract. Failure to do so may result in other

action, including a contract termination for default.

Am. Compl. Ex. 5 (bold in original) (emphasis added).

On January 25, 2013, Ms. Jennings responded to the Contracting Officer’s Notice. Gov’t

App. A73–76.2

On February 14, 2013, the Contracting Officer issued a letter permanently denying Ms.

Jennings access to the Postal facilities. Am. Compl. Ex. 7. The following reasons were cited:

On January 18, 2013, you were issued a temporary denial of access to the mails and

Postal facilities. The temporary denial of access referenced an option for you to

2

Ms. Jennings’ email to the Contracting Officer is attached as Court Exhibit A. In addition,

two affidavits of other USPS employees directly contradict the Contracting Officer’s conclusion

that Ms. Jennings “conducted [herself] in an unprofessional manner and disrupted the mail

processing operations[.]” Compare Am. Compl. Ex. 5, with Pl. App. A10, A11–12, attached as

Court Exhibit B. Since material facts are at issue as to whether the Contracting Officer’s February

21, 2013 termination was lawful, the Government’s November 13, 2015 Motion For Summary

Judgment is denied.

3

respond by January 25, 2013. Your response to the temporary denial of access was

received via email on January 25, 2013.

Your response, as well as the background information we received from local Postal

officials, appears to indicate that in at least two separate instances on January 18,

2013, you refused to follow instructions provided by an authorized Postal Service

supervisor. In addition, it appears that you allowed an unauthorized person to gain

access to the mails,3 which is disruptive to our operations and violates the terms of

your contract. Finally, your response does not provide any indication that you

would attempt to avoid these occurences [sic] in the future.

Consequently, I am permanently denying you access to the mails and all Postal

Facilities. This permanent denial is effective immediately.

 If you have not already done so, you are instructed to return the ID badge to the

Administrative Official.

 By copy of this letter, the US Postal Inspection Service is made aware of this

decision.

You may appeal this Denial of Access decision within five (5) days of receipt of

this letter under Management Instruction PO-530-2009-4, Section 172, Appeal

Process Related to the Investigation of a Contracting Officer. Your appeal letter

should be mailed to the contracting officer at the address shown at the bottom of

this letter. The contracting officer will then forward your letter to the Manager,

Surface Transportation.

Am. Compl. Ex. 7 (emphasis added).

On February 21, 2013, the Contracting Officer terminated Ms. Jennings for “failure to

perform service in accordance with the terms of [the] [C]ontract.” Gov’t App A66. The reasons

stated by the Contracting Officer for termination, however, were not those listed in the January

18, 2013 Notice of Temporary Denial of Access or the February 14, 2013 Notice of Permanent

Denial of Access. Instead, the Contracting Officer justified Ms. Jennings’ termination, because

you failed to provide a hired driver4 to operate service on [the Contract]. In a

telephone conversation later that day, you informed that you would not provide a

driver to cover service on February 20, 2013. You failed to operate service on

3

It appears that the “unauthorized person” was Ms. Jennings’ brother who was delivering

the mail as a substitute supplier, as required by Section C.2.10 and Section C.3.4(j) of the Contract.

Gov’t App. A72 (2/8/13 email from Ms. Jennings to the Contracting Officer) (reporting that

Postmaster Goshe “ran off [Ms. Jennings’] brother who has been running her route”).

4

Neither the terms “hired driver” nor “unauthorized person” appear anywhere in the forty-

eight page Contract. Likewise, the term “contract employee,” referred to in Section B.5 of the

Statement of Work also is not defined in the Contract.

4

February 19 and February 20, 2013, and turned in your keys required to operate

service on the route on February 20, 2013.

Therefore, enclosed is your copy of the PS Form 7440 terminating [the Contract]

for default. You are liable to the [USPS] for any damages incurred as a result of

your default, including excess costs for replacement service on the route. A claim

for any such damages may be made in the future, in a separate final decision.

This is the decision of the contracting officer[,] pursuant to the Contract Disputes

Act of 1978 and the clause of your contract entitled Claims and Disputes. You may

appeal this decision to the Postal Service Board of Contract Appeals by mailing or

otherwise furnishing written notice (preferably in triplicate) to the contracting

officer within 90 days from the date you receive this decision. The notice should

identify the contract by number, reference this decision, and indicate that an appeal

is intended. Alternately, you may bring an action directly in the United States Court

of Federal Claims within 12 months from the date you receive this decision.

Gov’t App. A66 (emphasis added).

Ms. Jennings’ termination was made retroactive effective close of business, February 16,

2013. Gov’t App. A66.

II. PROCEDURAL HISTORY.

On February 18, 2014, Ms. Jennings filed a Complaint in the United States Court of Federal

Claims, alleging that: (1) the actions taken by the USPS constitute a wrongful breach of contract

for which Plaintiff is entitled to $11,333.33, pursuant to the liquidated damages clause of the

Contract; (2) the USPS terminated the Contract in bad faith; and (3) Plaintiff is entitled to other

monetary damages in the amount of $170,000.00 (“Compl.”).

On June 19, 2014, the Government filed a Partial Motion To Dismiss, arguing that Ms.

Jennings’ claims should be dismissed, because they were not presented to a contracting officer or

certified, as required under the Contract Disputes Act (“CDA”).

On July 18, 2014, Ms. Jennings filed a Motion For Leave To File Amended Complaint,

that the court granted on July 21, 2014.

On July 21, 2014, Ms. Jennings filed an Amended Complaint, alleging that the claims in

the February 18, 2014 Complaint are the same in the July 21, 2014 Amended Complaint, with the

exception of a claim alleging that Ms. Jennings is entitled to damages in the amount of $56,666.67

for the bad faith termination of the Contact. On August 7, 2014, the Government filed an Answer.

On November 13, 2015, the Government filed a Motion For Summary Judgment, attaching

a Proposed Findings Of Uncontroverted Fact. On December 14, 2015, Ms. Jennings filed a

Response, together with a Response To Defendant’s Proposed Findings Of Uncontroverted Fact.

On January 13, 2016, the Government filed a Reply (“Gov’t Reply”).

5

III. DISCUSSION.

A. Jurisdiction.

The Tucker Act authorizes the United States Court of Federal Claims “to render judgment

upon any claim by or against, or dispute with, a contractor arising under [the Contracts Dispute

Act (“CDA”)] section 7104(b)(1) of title 41, including a dispute concerning termination of a

contract . . . on which a decision of the contracting officer has been issued under [the CDA].” 28

U.S.C. § 1491(a)(2).

The CDA provides that if a contractor has a claim against the Government, based on a

contract with the United States, the contractor first must submit a claim, in writing, to the

contracting officer responsible for that contract. See 41 U.S.C. § 7103(a). If the contracting officer

issues a final decision adverse to the contractor, the aggrieved contractor may bring an action

directly on the claim in the United States Court of Federal Claims. See 41 U.S.C. § 7104(b)(1).

Any such action must be filed within twelve months of receipt of the adverse contracting officer’s

final decision. See 41 U.S.C. § 7104(b)(3).

On February 21, 2013, the Contracting Officer issued a “‘final decision’ . . . pursuant to

the Contract Disputes Act of 1978 and the clause of [the] [C]ontract entitled Claims and Disputes.”

Gov’t App. A66. As such, the Contracting Officer deemed Ms. Jennings’ January 25, 2013

communication as a CDA claim. On February 18, 2014, Ms. Jennings timely filed a Complaint in

the United States Court of Federal Claims, alleging wrongful termination and seeking $170,000 in

damages, plus attorneys’ fees. Am. Compl. ¶¶ 15, 17. With the consent of the Government (ECF

No. 12), an Amended Complaint was filed on July 21, 2014, alleging wrongful termination, but

$68,000 in damages, plus attorneys’ fees. Gov’t App. A31.

For these reasons, the court has determined that it has jurisdiction to adjudicate the claims

alleged in the July 21, 2014 Amended Complaint. Accordingly, the Government’s June 19, 2014

Partial Motion To Dismiss is denied.

B. Standing.

The United States Supreme Court has held that “the question of standing is whether the

litigant is entitled to have the court decide the merits of the dispute or of particular issues.”

Warth v. Seldin, 422 U.S. 490, 498 (1975). Standing must be determined “as of the commencement

of suit[.]” Rothe Dev. Corp. v. Dep’t of Def., 413 F.3d 1327, 1334 (Fed. Cir. 2005) (quoting

Lujan v. Defs. of Wildlife, 504 U.S. 555, 570 n.5 (1992)). The party invoking federal jurisdiction

bears the burden of establishing standing. See Lujan, 504 U.S. at 560–61. Specifically, “a plaintiff

must show [that] it has suffered an ‘injury in fact’ that is . . . concrete and particularized and . . .

actual or imminent, not conjectural or hypothetical; . . . the injury is fairly traceable to the

challenged action of the defendant; and . . . it is likely, as opposed to merely speculative, that the

injury will be redressed by a favorable decision.” Friends of the Earth, Inc. v. Laidlaw Envtl.

Servs. (TOC), Inc., 528 U.S. 167, 180–81 (2000) (citations omitted).

The July 21, 2014 Amended Complaint alleges that Ms. Jennings suffered monetary injury

that is concrete, particularized, and fairly traceable to the Contracting Officer’s February 21, 2013

termination of the March 9, 2012 Contract. Am. Compl. ¶¶ 16–18. Any financial injury

6

established by Ms. Jennings also can be redressed by a monetary award. For these reasons, the

court has determined that Ms. Jennings has standing to seek an adjudication of the claims alleged

in the July 21, 2014 Amended Complaint.

C. Whether Sections C.2.10, C.3.1(6), and C.3.4(j) Of The March 9, 2012

Contract Are Unenforceable.

In Fomby-Denson v. Dep’t of the Army, 247 F.3d 1366 (Fed. Cir. 2001), the United States

Court of Appeals for the Federal Circuit, discussing precedential cases from the United States

Supreme Court, described the analysis that the trial court should follow when determining whether

it should enforce a government contract, where “enforcement would be contrary to the ‘public

policy of the United States as manifested in the Constitution, . . . federal statutes and applicable

legal precedents.’” Id. at 1374 (quoting Hurd v. Hodge, 334 U.S. 24, 35 (1948)). Our appellate

court advised, first “there is the rule that the federal courts should refrain from enforcing . . . United

States government . . . contracts when such enforcement would be contrary to the ‘public policy

of the United States as manifested in the Constitution [and] federal statutes[.]’” Fomby-Denson,

247 F.3d at 1375 (quoting Hurd, 334 U.S. at 35).

In the alternative, the federal courts should

refuse to enforce contracts where the public policy is reflected in “applicable legal

precedents.” In other words, the federal courts, as a matter of contract law, will not

enforce an agreement if the agreement would require violation of established public

policy norms, even if enforcing the agreement would not violate specific federal

statute . . . or constitutional requirement. This principle has particular force in cases

involving United States government contracts where federal contract law is applied,

see Boyle v. United Techs. Corp., 487 U.S. 500, 512 (1998)[.]

Fomby-Denson, 247 F. 3d at 1375 (quoting Hurd, 334 U.S. at 35).

This case concerns the second category of contract. The contract in this case includes three

provisions, if enforced as a basis for termination, change the nature of an employment agreement

into a contract of adhesion, where “there is great disparity in bargaining power, and where [one

party] receives nothing for the . . . provision[.]” Fuentes v. Shevin, 407 U.S. 67, 94 (1972) (quoting

D.H. Overmyer Co. Inc., of Ohio v. Frick Co., 405 U.S. 174, 188 (1972)). Specifically, these

provisions are ambiguous, are not supported by adequate consideration, and impose an

unreasonable burden on due process.

Section C.2.10 of the Contract requires the supplier to have “adequate contingency plans

in place[,] should the use of postal facilities be terminated or limited.” Gov’t App. A26 (emphasis

added). The term “adequate contingency plans” is ambiguous and not defined anywhere in the

forty-eight page Contract. In addition, this provision does not specify the circumstances under

which the USPS lawfully may terminate or limit access to a Postal facility or for how long any

such termination or limit to access could last—one week, one month, one year, or longer? More

importantly, this provision provides that: “In no event shall the [USPS] be held liable for, or incur

any additional cost associated with, such use or termination of such use during the contract term.”

Gov’t App. A26. In effect, all costs of a unilateral USPS decision to terminate or limit access are

7

imposed on the supplier for the term of the Contract—clearly an unreasonable financial burden

and obligation unsupported by consideration—a fatal defect to which the court will return.

Section C.3.4(j) of the Contract requires that the supplier must perform or provide

substitute performance during the entire period that “any request for relief, claim, appeal or action

arising under the contract” is pending. Gov’t App. A32. Again, this provision affords the USPS

the unilateral ability to impose an unreasonable financial obligation on a supplier who elects to

exercise their due process rights in court to challenge any aspect of the Contract. This imposition

is analogous to the constitutionally banned practice of allowing the garnishment of wages prior to

a court rendering judgment on the validity of a debt—a practice that the United States Supreme

Court has held violates the fundamental principles of due process. See Sniadach v. Family Fin.

Corp. of Bay View, 395 U.S. 337, 342 (1969); see also North Georgia Finishing, Inc. v. Di-Chem,

Inc., 419 U.S. 601, 607 (1975) (holding, as an unconstitutional burden of due process, the practice

of allowing a creditor to impound the bank account of an alleged debtor, based on an affidavit

containing “only conclusory allegations . . . without participation by a judge,” and “no provision

for an early hearing”). Similarly, Section C.3.1(6) of the Contract requires that the supplier assure

the USPS that the supplier will assume continued performance and bear the entire cost of

performance under Section C.2.10 or Section C.3.4(j), or risk termination for default. Of course,

a termination for default will have a significant adverse impact on a supplier’s ability to be hired

for other federal jobs or one in the private sector.

In this case, Ms. Jennings entered into the March 9, 2012 Contract to perform the services

of a rural mail carrier provider for which she was paid $34,000 per year. Under Sections C.2.10,

C.3.1(6), and C.3.4(j), however, Ms. Jennings also was required to assume potential liability of

approximately $238,000 if she decided to exercise her due process rights to bring an action under

the Contract, or risk being terminated for default. As the RESTATEMENT (SECOND) OF CONTRACTS

§ 79 cmt. e (1981) states, such gross inadequacy of consideration “‘shocks the conscience’ [and]

is often said to be a ‘badge of fraud,’ justifying a denial of specific performance.” Id.; see also id.

§ 78 cmt. c (“Unenforceable promises. A promise may be unenforceable by reason of lack of

consideration or public policy[.]”); Id. § 86(2)(b) (“A promise is not binding . . . to the extent that

its value is disproportionate to the benefit.”).

IV. CONCLUSION.

For the reasons discussed herein, the Government’s June 19, 2014 Partial Motion To

Dismiss and November 13, 2015 Motion For Summary Judgment are denied. The Government is

ordered, within thirty days after issuance of this Memorandum Opinion And Order, to show cause

why the court should not determine that Sections C.2.10, C.3.1(6), and C.3.4(j) of the March 9,

2012 Contract are unlawful and unenforceable.5

5

If Ms. Jennings’ February 21, 2013 termination was unlawful, later discovered evidence

that she did not have required insurance coverage at all times may support a termination on other

grounds. But, the fact that Ms. Jennings had no prior performance issues and voluntarily acted in

a prompt manner to cure the situation would appear to warrant further consideration by the

Contracting Officer. In any event, Ms. Jennings did not have an opportunity to submit a claim on

8

Aside from Ms. Jennings’ case, the court is concerned that the boilerplate terms in Sections

C.2.10, C.3.1(6), and C.3.4(j) may have been invoked in other cases to terminate USPS employees.

Therefore, the court will convene a status conference on July 8, 2016 at 717 Madison Place, N.W.,

Washington, D.C. at 1:30 pm EST to hear argument on the Show Cause Order and whether a

permanent injunction is warranted, in the event the court determines these contract provisions to

be unlawful. In addition to trial counsel for the Department of Justice, the court orders the

attendance of Thomas J. Marshall, General Counsel and Executive Vice President of the United

States Postal Service. Counsel for Ms. Jennings may participate by telephone conference to avoid

the expense of travel.

IT IS SO ORDERED.

s/ Susan G. Braden

SUSAN G. BRADEN

Judge

which the Contracting Officer could issue a final decision under the CDA on this basis. Therefore,

those issues are not properly before the court.

9