Aries Construction Corporation v. United States

In the United States Court of Federal Claims

No. 22-166C

(Filed: February 21, 2023)

FOR PUBLICATION

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ARIES CONSTRUCTION *

CORPORATION, *

*

Plaintiff, *

*

v. *

*

THE UNITED STATES, *

*

Defendant. *

*

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Tara M. Patterson, Tiffany & Bosco, P.A., Phoenix, AZ, for Plaintiff. With her

was William Morris Fischbach, III, Tiffany & Bosco, P.A., Phoenix, AZ.

Daniel F. Roland, Trial Attorney, Commercial Litigation Branch, Civil

Division, United States Department of Justice, Washington, D.C., for Defendant.

With him on briefs were Brian M. Boynton, Principal Deputy Assistant Attorney

General, Patricia M. McCarthy, Director, and Elizabeth M. Hosford, Assistant

Director, United States Department of Justice, Washington, D.C., and Karen D.

Glasgow, Field Solicitor, San Francisco Field Office, Office of the Solicitor,

Department of the Interior, San Francisco, CA.

OPINION AND ORDER

Plaintiff Aries Construction Corp. alleges that it contracted with the United

States National Park Service (“NPS”) for installation of a water pipeline system. See

Compl. (ECF 1). Plaintiff claims that NPS both breached the contract and breached

the duty of good faith and fair dealing when administering the contract. The

government has moved to dismiss the latter cause of action for lack of jurisdiction

and failure to state a claim. See Partial Mot. to Dismiss (“Mot.”) at 1 (ECF 9). The

parties have fully briefed the issue and I have heard oral argument.1 For the reasons

discussed below, the motion to dismiss is DENIED.2

1 Resp. to Mot. to Dismiss (“Resp.”) (ECF 18); Reply to Resp. to Mot. to Dismiss (“Reply”) (ECF 20);

Certified Transcript (“Tr.”) (ECF 24).

2 Plaintiff requested a stay if Defendant’s motion were granted. Because Defendant’s motion is denied,

Plaintiff’s request for a stay is moot.

BACKGROUND

The Complaint alleges the following facts.3 Plaintiff and NPS entered a

contract, governed by the Contract Disputes Act (41 U.S.C. § 7101–04) (“CDA”), for

water pipeline construction. See Compl. ¶¶ 2–4 (ECF 1). When Plaintiff began work,

it “encountered unexpected hard rock requiring additional equipment and labor to

remove it … resulting in delays.” Id. ¶¶ 8; 16–17. Plaintiff informed NPS officials,

including the contracting officer, of the unexpected conditions. Id. ¶¶ 9–11. NPS

instructed Plaintiff to proceed and Plaintiff incurred additional expenses. Id. ¶¶ 9,

12, 17–18. But when Plaintiff submitted CDA claims to the contracting officer for

money covering the additional work, the claims were denied. Id. ¶¶ 13–14, 15, 19; see

also Pl.’s Ex. E (ECF 1-5); Pl.’s Ex. G (ECF 1-7).

Plaintiff alleges that denial of the CDA claims breached the contract (Count I)

and the duty of good faith and fair dealing (Count II).4 Defendant has moved to

dismiss Count II, arguing that Plaintiff (1) failed to present a breach of the duty of

good faith and fair dealing to the contracting officer, and (2) has not alleged sufficient

facts to state a claim on which relief can be granted. See Mot. at 1; see also RCFC

12(b)(1), (6).

DISCUSSION

I. Legal Standards

The “plaintiff bears the burden of establishing subject-matter jurisdiction by a

preponderance of the evidence.” Inter-Tribal Council of Arizona, Inc. v. United States,

956 F.3d 1328, 1337 (Fed. Cir. 2020) (quoting M. Maropakis Carpentry, Inc. v. United

States, 609 F.3d 1323, 1327 (Fed. Cir. 2010)). When reviewing a motion to dismiss for

lack of subject-matter jurisdiction under RCFC 12(b)(1), this Court “accepts as true

all uncontroverted factual allegations in the complaint, and construes them in the

light most favorable to the plaintiff.” Estes Exp. Lines v. United States, 739 F.3d 689,

692 (Fed. Cir. 2014) (citing Cedars–Sinai Med. Ctr. v. Watkins, 11 F.3d 1573, 1583–

84 (Fed. Cir. 1993)). If a court determines that it does not have jurisdiction, it “is

bound to dismiss as soon as it is aware of the deficiency.” Dico, Inc. v. United States,

33 Fed. Cl. 1, 4 (1993), aff’d, 48 F.3d 1199 (Fed. Cir. 1995); see RCFC 12(h)(3).

3 Any facts — as distinct from legal conclusions — pleaded in a complaint must be “accepted as true.”

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

4 Plaintiff also alleges that NPS breached the contract by denying two other CDA claims intended to

correct allegedly defective contractual specifications. See Compl. at ¶¶ 20–34; see also Pl.’s Ex. I (ECF

1–9); Pl.’s Ex. K (ECF 1–11). Those CDA claims are not at issue in the present motion. See Compl. at

¶¶ 35–40.

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To survive a motion to dismiss under RCFC 12(b)(6), a complaint in this Court

must contain well-pleaded factual allegations “sufficient ..., [when] 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

has facial plausibility 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. A court considers whether to make that inference in light of “its judicial

experience and common sense.” Id. at 679. The inference must be stronger than “a

sheer possibility that a defendant has acted unlawfully.” Id. at 678. But the inference

does not need to be probable. Rather, “a well-pleaded complaint may proceed even if

it strikes a savvy judge that actual proof of those facts is improbable.” Twombly, 550

U.S. at 556. The court “must draw all reasonable inferences in favor of the claimant.”

Call Henry, Inc. v. United States, 855 F.3d 1348, 1354 (Fed. Cir. 2017) (citing

Bell/Heery v. United States, 739 F.3d 1324, 1330 (Fed. Cir. 2014)). And “Rule 12(b)(6)

does not countenance ... dismissals based on a judge’s disbelief of a complaint’s factual

allegations.” Neitzke v. Williams, 490 U.S. 319, 327 (1989) (quoted in Twombly, 550

U.S. at 556).

II. Merits

I conclude that this Court has jurisdiction because Plaintiff gave the

contracting officer sufficient notice of a good faith and fair dealing claim. I further

conclude that Plaintiff has stated a plausible claim for breach of the duty of good faith

and fair dealing.

A. Jurisdiction

Before suing in this Court on a claim governed by the CDA, a contractor must

present that same claim to the contracting officer and obtain the contracting officer’s

final decision. 41 U.S.C. §§ 7103(a), 7104(b). That presentment requirement is

jurisdictional; this Court cannot hear a claim under the CDA if it is unmet. Tolliver

Grp., Inc. v. United States, 20 F.4th 771, 775 (Fed. Cir. 2021); James M. Ellett Constr.

Co. v. United States, 93 F.3d 1537, 1541–42 (Fed. Cir. 1996); W.M. Schlosser Co. v.

United States, 705 F.2d 1336, 1338–39 (Fed. Cir. 1983). Defendant argues, in essence,

that Plaintiff’s claim for breach of the duty of good faith and fair dealing is too

different from Plaintiff’s CDA claim to the contracting officer for this Court to have

jurisdiction.

For a CDA claim to the contracting officer to be “the same” as a claim in this

Court, the claims must be based on the same basic theory, arise from same operative

facts, and seek the same relief. Scott Timber v. United States, 333 F.3d 1358, 1365

(Fed. Cir. 2003). By the same token, this Court “treat[s] requests as involving

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separate claims if they ... assert grounds that are materially different from each other

factually or legally.” See K-Con Bldg. Sys., Inc. v. United States, 778 F.3d 1000, 1005

(Fed. Cir. 2015). Defendant does not appear to dispute that Plaintiff presented the

same operative facts to the contracting officer and sought the same relief. See Reply

at 2 n.2. The question, rather, is whether Plaintiff presented the same basic legal

theory to the contracting officer.

The Federal Circuit has made clear that CDA presentment does not require

claims in this Court to follow “the exact language or structure of the original

administrative CDA claim.” Scott Timber, 333 F.3d at 1365. When a claim in this

Court “arise[s] from the same operative facts [and] claim[s] essentially the same

relief” as the CDA claim to the contracting officer, this Court has jurisdiction even if

the contractor “assert[s] differing legal theories for that recovery,” so long as the

contractor put the contracting officer on notice of the basis of the claim. Id. If the

contracting officer was on notice of the factual and legal substance, the contractor

may assert a “slightly different legal theor[y]” when he sues. Id. at 1366; see also

Kellogg Brown & Root Servs., Inc. v. United States, 115 Fed. Cl. 46, 54 (2014) (“[T]his

court must examine the operative facts and relief sought in the two CDA claims, not

the legal labels placed on those claims, to determine whether those two CDA claims

are the same.”). For example, in Scott Timber this Court had jurisdiction where the

original CDA claim “contended that the [government] lacked authority under the

contracts” to take certain actions, and the complaint in this Court “elaborated on

those broad original CDA claims and identified specific contract provisions that the

government allegedly breached.” Tolliver Grp., 20 F.4th at 777 (discussing Scott

Timber).

That brings us to Plaintiff’s claim for breach of the duty of good faith and fair

dealing. To prevail, Plaintiff must show that “a specific promise” in the contract was

“undermined” by the government. Dobyns v. United States, 915 F.3d 733, 739 (Fed.

Cir. 2019). The promise must be grounded in the terms of the contract, id., because

“what that duty entails depends in part on what that contract promises (or

disclaims).” Precision Pine & Timber, Inc. v. United States, 596 F.3d 817, 830 (Fed.

Cir. 2010). Plaintiff must also show “subterfuge[]” or “evasion[],” such as “evasion of

the spirit of the bargain, lack of diligence and slacking off, willful rendering of

imperfect performance, abuse of a power to specify terms, [or] interference with or

failure to cooperate in the other party’s performance.” Dotcom Assocs. I, LLC v.

United States, 112 Fed. Cl. 594, 596 (2013) (quoting Restatement (Second) of

Contracts § 205). Against the government, such claims “typically involve some

variation on the old bait-and-switch” or “government action ... specifically designed

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to reappropriate the benefits the other party expected to obtain from the

transaction[.]” Precision Pine, 596 F.3d at 829.

Thus, a claim for breach of good faith and fair dealing must include (1) a

specific promise that was undermined, plus some combination of (2) subterfuge,

evasion, or dishonesty, and (3) reappropriation of a reasonably expected benefit. If

Plaintiff presented such facts to the contracting officer with a claim for money, then

the contracting officer had sufficient notice of a good faith and fair dealing claim, even

if the current legal packaging is “slightly different.” Scott Timber, 333 F.3d at 1365.

Drawing all inferences in favor of Plaintiff, as I must at this stage, Estes Exp.

Lines, 739 F.3d at 692, I find that Plaintiff adequately presented the claim.5 Plaintiff’s

CDA claims to the contracting officer requested an equitable adjustment on the

ground that NPS officials had asked Plaintiff to perform additional work to overcome

unexpected obstacles at the job site. A contractor is entitled to an equitable

adjustment for a constructive change to the contract when it shows “(1) that it

performed work beyond the contract’s requirements, and (2) that the additional work

was ordered, expressly or impliedly, by the government.” BGT Holdings LLC v.

United States, 984 F.3d 1003, 1012 (Fed. Cir. 2020); Kiewit Infrastructure W. Co. v.

United States, 972 F.3d 1322, 1329 (Fed. Cir. 2020); see Aydin Corp. v. Widnall, 61

F.3d 1571, 1577 (Fed. Cir. 1995) (“Where it requires a constructive change in a

contract, the Government must fairly compensate the contractor for the costs of the

change [through an equitable adjustment].”). The contracting officer was therefore on

notice that if he denied an equitable adjustment to which Plaintiff was entitled,

Plaintiff could allege that the government had reappropriated the contract’s promised

benefits. That, in turn, meant the contracting officer was on notice of the facts and

general legal basis that could support a claim for breach of the duty of good faith and

fair dealing. Tolliver Grp., 20 F.4th at 777; see also Lee’s Ford Dock, Inc. v. Sec’y of

the Army, 865 F.3d 1361, 1370 (Fed. Cir. 2017) (CDA claims contractor presented to

the contracting officer must “support[] its later-asserted ... claim”); RMA Eng’g

S.A.R.L. v. United States, 140 Fed. Cl. 191, 221 (2018) (to give the contracting officer

notice of a good faith and fair dealing claim, contractor must have presented “the

operative facts of a claim for breach of the duty of good faith and fair dealing”).6

5 The contracting officer denied Plaintiff’s requests because he did not believe Plaintiff had followed

the contractual procedure for obtaining approval for more work. Pl.’s Ex. E; Pl.’s Ex. G. The

government has not moved to dismiss on that basis, though. I resolve the jurisdictional question of

presentment without reaching the merits question of whether the contract permits Plaintiff’s equitable

adjustment.

6 A recent decision of this Court concluded that a CDA claim for an equitable adjustment was not

sufficient to establish jurisdiction over a claim for breach of the duty of good faith and fair dealing.

David Boland, Inc. v. United States, No. 22-131C, 2022 WL 9655097, at *5 (Fed. Cl. Oct. 17, 2022).

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The government objects that the contracting officer was never given the

opportunity to consider whether his denial of the CDA claim breached the duty of

good faith and fair dealing. Obviously Plaintiff could not have presented a claim about

future events. The government proposes that Plaintiff should have submitted yet

another CDA claim to the contracting officer, identical to the original but for an

additional allegation that the contracting officer’s decision breached the duty of good

faith and fair dealing. Tr. at 28.

That makes little sense. The point of CDA presentment is to give the

contracting officer sufficient notice to “receive and pass judgment on the contractor’s

entire claim.” Scott Timber, 333 F.3d at 1366; see also Cont. Cleaning Maint., Inc. v.

United States, 811 F.2d 586, 592 (Fed. Cir. 1987). Expecting the contracting officer to

be aware of the legal consequences of his own decisions is perfectly consistent with

that purpose.

More fundamentally, the government’s argument proves too much. A CDA

claim for an equitable adjustment based on a constructive change is not a claim for

breach of contract: It is a claim pursuant to contractual rights. See Reflectone, Inc. v.

Dalton, 60 F.3d 1572, 1577 (Fed. Cir. 1995) (requests for equitable adjustment are “a

written demand for payment as a matter of right”); Crown Coat Front Co. v. United

States, 386 U.S. 503, 511 (1967) (constructive changes “are not breaches of contract

[but instead] give rise to claims for equitable adjustments”). A breach of contract does

not occur until the claim for an equitable adjustment is wrongly denied. See Crown

Coat Front, 386 U.S. at 511; BGT Holdings, 984 F.3d at 1010 (failure to provide an

equitable adjustment can constitute breach of contract); W. Contracting Corp. v.

United States, 144 Ct. Cl. 318, 333 (1958) (“The refusal of the contracting officer, upon

demand by plaintiff, to make an equitable adjustment constituted a breach of

contract.”). A CDA claim for an equitable adjustment and a suit for breach of contract

are thus no less distinct than equitable adjustment and a suit for breach of the duty

of good faith and fair dealing. That means that if the government were right,

contractors denied equitable adjustments could not sue for breach of contract in this

Court until they presented their contracting officers with a second CDA claim alleging

that denial of an equitable adjustment breached the contract.

The cases are distinguishable. The plaintiff in David Boland “appeared to concede at oral argument”

that its request to the contracting officer “did not include the operative facts underlying a breach of

the duty of good faith and fair dealing.” Id. In this case, Plaintiff informed the contracting officer that

NPS officials had told it to begin the additional work. See Ex. F. The David Boland Court did reason

that a single claim to the contracting officer is insufficient to establish jurisdiction over claims arising

from the contracting officer’s alleged bad faith. David Boland, 2022 WL 9655097 at *5. But I

respectfully part ways from my learned colleague on that question for the reasons set out in this Order.

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That has never been the law. Lawsuits for breach of contract after denial of a

single CDA claim for an equitable adjustment are common. See, e.g., BGT Holdings,

984 F.3d at 1010; Sarro & Assocs., Inc. v. United States, 152 Fed. Cl. 44, 53 (2021)

(suit for breach of contract based on denial of equitable adjustment); Senate Builders

& Constr. Managers, Inc. v. United States, 131 Fed. Cl. 719 (2017) (same). When a

contractor presents a contracting officer with a CDA claim for an equitable

adjustment based on particular facts, this Court has jurisdiction over claims that the

contracting officer’s denial breached the contract. And if that rule permits lawsuits

for breach of contract after denial of an equitable adjustment, it is hard to see why it

would not also permit lawsuits for breach of the duty of good faith and fair dealing.7

The government provides no basis on which to distinguish the causes of action.

The government relies on the Federal Circuit’s decisions in Reliance Insurance

Co. v. United States, 931 F.2d 863 (Fed. Cir. 1991), and Renda Marine, Inc. v. United

States, 71 Fed. Cl. 378 (2006). Mot. at 7. In both cases, the Federal Circuit held that

CDA claims for equitable adjustments did not adequately present claims for breach

of the duty of good faith and fair dealing. Reliance Insurance, 931 F.2d at 866; Renda

Marine, 71 Fed. Cl. at 392. The government argues that these cases show that

equitable adjustment and good faith and fair dealing are not merely “slightly different

legal theories” as Scott Timber allows, but are in fact completely distinct theories that

must be presented individually. See Scott Timber, 333 F.3d at 1366.

Those cases are distinguishable, however, because the facts giving rise to the

contractors’ good faith and fair dealing claims were separate from the CDA

complaints to the contracting officers. See Reliance, 931 F.2d at 865; Renda Marine,

71 Fed. Cl. at 385. In Reliance, the government issued more than 200 change orders

that resulted in delays, which the contractor alleged constituted bad faith and a

breach of the contract. Reliance, 931 F.2d at 865. In Renda Marine, the government’s

refusal to provide written instructions gave rise to the allegation of bad faith. Renda

Marine, 71 Fed. Cl. at 385. Because the facts underlying the alleged breaches

preceded the contractor’s claim to the contracting officer, the contractors in both cases

had everything they needed to present the contracting officer with their claims for

breach of the duty of good faith and fair dealing in a CDA claim. Reliance and Renda

Marine thus stand for the proposition that a contractor should include breach of the

7 For similar reasons, the government is wrong to argue that Plaintiff’s CDA claim for an equitable

adjustment and its complaint for breach of the duty of good faith and fair dealing are different claims

because they have different elements. Mot. to Dismiss at 6–7. The government is comparing apples

and oranges: Bringing an alleged contractual entitlement to the contracting officer’s attention is not

the same as claiming a breach. What matters is that once the contracting officer is on notice of the

contractor’s alleged entitlement, the contractor can characterize the denial in different legal ways.

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duty of good faith and fair dealing in a CDA claim to the contracting officer when the

available facts support it.

But the rule of Reliance and Renda Marine is not the one applicable here,

where the contracting officer’s denial of the CDA claim itself supplied the last element

of claims for breach of contract and for breach of the duty of good faith and fair

dealing. When a CDA claim contains everything needed to put the contracting officer

on notice except for the contracting officer’s own denial, the contractor can pursue

different theories in this Court for why the denial was wrongful. The government’s

reading of those cases would chain contractors to the legal theories in their CDA

claims, contrary to the direction of Scott Timber. See 333 F.3d at 1365.

I conclude that Plaintiff gave the contracting officer notice of facts sufficient to

put him on notice that denial of the CDA claim could breach the duty of good faith

and fair dealing. This Court therefore has jurisdiction.

B. Failure to State a Claim

As explained above, whether Plaintiff has stated a claim upon which relief can

be granted depends on whether the well-pleaded facts in the complaint, taken as true,

permit a plausible inference that the government is liable. Iqbal, 556 U.S. at 678. To

plead a claim for breach of the duty of good faith and fair dealing, Plaintiff must allege

(1) a specific promise that was undermined, Dobyns, 915 F.3d at 739, plus some

combination of (2) subterfuge, evasion, or dishonesty, Dotcom, 112 Fed. Cl. at 596,

and (3) reappropriation of a reasonably expected benefit, Precision Pine, 596 F.3d at

829. I conclude that Plaintiff has adequately alleged those elements.

The government argues that Plaintiff has failed to point to a specific promise

that the government undermined. Mot. at 2. But if NPS directed Plaintiff to perform

additional work, then denied payment when Plaintiff submitted a CDA claim — as

Plaintiff alleges, Compl. ¶¶ 9, 17 — the government may have evaded its obligation

to pay for constructive changes in the contract. See Dotcom, 112 Fed. Cl. at 596. For

much the same reasons that the facts Plaintiff presented to the contracting officer

were sufficient notice, those facts — plus the contracting officer’s denial — state a

claim for breach of the duty of good faith and fair dealing.

The government also argues that the Plaintiff’s good faith and fair dealing

claim should be dismissed as redundant because Plaintiff’s complaint also includes a

count for breach of contract based on the same facts. See Reply 3 n.3. Redundancy in

a complaint’s causes of action, of course, is not ordinarily a basis for dismissal. This

Court’s Rules expressly permit “alternative statements” of claims, or even

inconsistent theories for relief. See RCFC 8(d)(2), (3). Defendant’s only authority for

dismissal of claims for breach of the duty of good faith and fair dealing that overlap

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with claims for breach of contract — CFS International Capital Corp. v. United States

— applied New York law, which does not govern in this case. See 118 Fed. Cl. 694,

701 (2014).8 I therefore see no basis to depart from the usual rules of pleading.

CONCLUSION

For the foregoing reasons, Defendant’s Motion to Dismiss is DENIED.

IT IS SO ORDERED.

s/ Stephen S. Schwartz

STEPHEN S. SCHWARTZ

Judge

8 One case appears to apply CFS International more broadly, but without acknowledging the earlier

case’s basis in New York law. Hamilton Square, LLC v. United States, 160 Fed. Cl. 617, 629 (2022). A

Federal Circuit decision dismissed a good faith and fair dealing claim as redundant because “the

contract itself provide[d] other avenues of relief for [plaintiff] that preempt the need to invoke the

doctrine of good faith and fair dealing.” BGT Holdings, 984 F.3d at 1016. The government points to no

similar provision applicable here.

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