Petition for Writ of Certiorari — J. E. T. S., Inc. v. United States

37-1850

No. ————

IN THE

Supreme Court of the United States

OCTOBER TERM, 1987

J.E.T.S., INC.,

Petitioner,

V.

THE UNITED STATES OF AMERICA,

Respondent.

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

Huco N. GERSTL

GERSTL & GORMAN, INC.

Attorneys at Law

33 Soledad Drive

Monterey, CA 93940

Telephone: (408) 649-0666

Attorneys for Petitioner

J.T .S., Inc.

MAY 11, 1988

WILSON - EPES PRINTING Co., INC. - 789-0096 - WASHINGTON, D.C. 20001

QUESTIONS PRESENTED FOR REVIEW

1. Did the Armed Services Board of Contract Appeals

have jurisdiction to grant summary judgment in favor

of the government, and did the United States Court of

Appeals for the Federal Circuit have jurisdiction to af-

firm that judgment?

2. Was the Petitioner denied due process in that the

Armed Services Board of Contract Appeals (and the

United States Court of Appeals for the Federal Circuit)

utilized Petitioner’s conviction in a criminal prosecution

on other matters as a ground for violation of its Fifth

Amendment property rights in the instant case?

3. Was the granting of summary judgment by the

ASBCA (as affirmed by the Court of Appeals) barred by

either:

(a) Res judicata; or

(b) Law of the case?

(i)

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED FOR REVIEW ................. i

TABLE OF CONTENTS ............... NS aia la iasasuercatuancaaanes iii

ye SP De MN bey 6) 4 yt: ee Sindee A iv

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR

ep eg a FN §. f°) Oy 1

OPINION BELOW ............ San test taavaauseadavanaicesealienssuiieimeabades 1

SER AE ORR ek ee 2

CONSTITUTIONAL PROVISION INVOLVED ........... 2

SrAtemens OF THE CASE..................................... om 2

REASONS FOR GRANTING THE WRIT _............ 5

I. THE BOARD HAD NO JURISDICTION TO

RELITIGATE ENTITLEMENT .............. = 5

Il. THE GRANTING—AND AFFIRMANCE—OF

SUMMARY JUDGMENT BASED ON J.E.T.S.’

PARENT’S CONVICTION CONSTITUTED

ABUSE OF DISCRETION, PREJUDICIAL

ERROR, AND DENIAL OF DUE PROCESS. 7

lil. WHETHER OR NOT THE PETITIONER WAS

A SMALL BUSINESS WAS NOT AT ISSUE... 10

a AE RR a 12

(iii)

iv

TABLE OF AUTHORITIES

CASES Page

Bond vs. Brown, 12 How. (53 U.S.) 254 (1851) -... 10

Cardwell vs. Kurtz, 765 F.2d 776 (9th Cir.1985) .. 11

De Sollar vs. Hanscome, 158 U.S. 216 (1895) ......... 10

Drum vs. Nasuti, 648 F. Supp. 888 (ED Pa. 1986),

aff'd mem., 831 F.2d 286 (3d Cir. 1987) —........... 9

Duncan vs. Atchison, T. and S.F.R. Co., 72 Fed.

es I UI esa arcven sense canenlonnecais 10

Emich Motors Corporation vs. General Motors

Corporation, 340 U.S. 558 (1951) ......................... 9

Federated Department Stores vs. Moitie, 452 U.S.

Be ie I ios scat cciesasakseiemanaieks dl centontunacietinantvdcedibias 6

Frank vs. Mangum, 237 U.S. 309 (1915) -....000... 9

Gindes vs. United States, 740 F.2d 947 (Fed. Cir.),

cert. denied, 469 U.S. 1074 (1984) ........................ 12

J.E.T.S., Inc. vs. United States, 838 F.2d 1196

A es <I ee eae ee 1

J.E.T.S., Inc., ASBCA No. 28642, 87-1 BCA (CCH)

7 19,569 (1987) ............... SNe EDN D9 te AE, 5,7

J.E.T.S., Inc., ASBCA No. 26135, 82-2 BCA (CCH)

» Syl Rel ee AES tee eee OK TOR i METD at No 3

K & R Engineering Company, Inc. vs. United

States, 616 F.2d 469 (Ct. Cl. 1980) ..................... 11

Kremer vs. Chemical Construction Corporation,

A __ aRcemieee avnr COC TRE cr 6

Lee vs. City of Peoria, 685 F.2d 196 (7th Cir.

UN aces cents asinantasiecoiseseniaotaaaciaseaahcaciieioattisaeendase 7

Migra vs. Warren City School District Board of

Education, 465 U.S. 75 (1984) ...................200....... 6

Parklane Hosiery vs. Shore, 439 U.S. 322 (1979 .. 6

Pubali Bank vs. City National Bank, 777 F.2d 1340

I ero 11

Ralston Purina Company vs. Novak, 111 F.2d 631

I RC I ee 10

Schwartz vs. N.M.S. Industries, Inc., 575 F.2d

ee eee a ee eae 11

Sealfon vs. United States, 332 U.S. 575 (1948)... 9

Sidney vs. Zah, 718 F.2d 1453 (9th Cir. 1983) ....... 7

Se ee

v

TABLE OF AUTHORITIES—Continued

Smith International, Inc. vs. Hughes Tool Company,

759 F.2d 1572 (Fed. Cir.), cert. denied, 474 U.S.

RS SE ich echt sntneanccs coceccteninslinpiieteees aan,

Town of Seabrook vs. New Hampshire, 738 F.2d

Re | ERA ee Rena FA ten

United States vs. Burnette, 800 F.2d 1558 (11th

GA TED ab cakdcenteencconecatenacdassepdnsavuonmtartasisameeetics

United States vs. Mississippi Valley Generating

Company, 364 U.S. 520 (1961) .............................

United States vs. Turtle Mountain Band of Chip-

pewa Indians, 612 F.2d 517 (Ct. Cl. 1979) .........

United States vs. Uzzell, 648 F. Supp. 1362 (D.D.C.

IIE as sciecinicssapneenchbecnmcinscbeitegelicsmactanamh teeta tad ianenteaaes,

Waggoner vs. Dalliare, 767 F.2d 589 (9th Cir.

1985), cert. denied, 475 U.S. 1064 (1986) _........

Washington Gas Light Company vs. District of

Comecmtie, DR Ci cee CD oa eeccsceccersccnees

White vs. Murtha, 377 F.2d 428 (5th Cir. 1967) ..

Page

11

11

10

IN THE

Supreme Court of the United States

OCTOBER TERM, 1987

No.

J.E.T.S., INC.,

. Petitioner,

THE UNITED STATES OF AMERICA,

Respondent.

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

The Petitioner, J.E.T.S., INC.,' respectfully prays that

a writ of certiorari issue to review the judgment of the

United States Court of Appeals for the Federal Circuit

entered on February 11, 1988.

OPINION BELOW

The decision of the Court of Appeals affirmed the de-

cision of the Armed Services Board of Contract Appeals

{A.S.B.C.A.) denying petitioner’s claim for an equitable

adjustment in contract price. A copy of the appellate

opinion is attached as Appendix “A”. The opinion is re-

ported at 838 F.2d 1196 (Fed. Cir. 1988). The court had

earlier denied petitioner’s suggestion for hearing en bane.

1 J.E.T.S., INC., is a wholly owned subsidiary of ALLIED MAN-

AGEMENT, INC. The following may be considered affiliates:

J.E.T.S. WAESCHEREI, GmbH, and OLD DOMINION INSUR-

ANCE CO.

2

JURISDICTION

On February 11, 1988, the Court of Appeals entered

judgment affirming the A.S.B.C.A.’s decision denying pe-

titioner’s claim for equitable adjustment. The jurisdic-

tion of this court is invoked under Title 28, United States

Code. Section 1254(1). No other petitioner is involved

in this petition.

CONSTITUTIONAL PROVISION INVOLVED

United States Constitution, Amendment V:

Nor shall any person . . . be deprived of life, lib-_

erty, or property, without due process of law....

STATEMENT OF THE CASE

On April 1, 1980, Petitioner, J.E.T.S., INC. ‘herein-

after “J.E.T.S.”) was awarded a full food service man-

agement contract at Vandenberg Air Force Base in Cali-

fornia. The contract was a firm, fixed price contract

which contained a “changes” clause and an “option” clause.

The contract was a 100% small business set aside con-

tract which required J.E.T.S. to certify that it was a

small business.

On March 23, 1981, respondent, THE UNITED

STATES OF AMERICA (hereinafter “government”’), at-

tempted to exercise the first year option. J.E.T.S. informed

the government that it did not feel the option had been

validly exercised and indicated that it would continue to

perform the services required, but under protest. Simul-

taneously, J.E.T.S. presented a claim against the govern-

ment under the “changes” clause. The government denied

the claim and J.E.T.S. timely appealed to the Armed

Services Board of Contract Appeals (A.S.B.C.A.), Case

Number 26135, in June, 1981.

While the appeal was pending, the government pur-

ported to exercise its second year option in January,

1982. J.E.T.S. protested again, but continued to per-

form services under threat of termination for default.

3

On August 4, 1982, the A.S.B.C.A. granted summary

judgment in favor of J.E.T.S. on the issue of entitle-

ment, holding that the government had not validly exer-

cised its option, and that J.E.T.S.’ continued performance

constituted a constructive change for which it was en-

titled to an equitable adjustment. The matter was re-

manded to the contracting officer to negotiate the amount

of such adjustment. J.E.T.S., Inc., ASBCA No. 26135,

82-2 BCA (CCH) % 15,986 (1982).

The time for appeal from the A.S.B.C.A. decision ex-

pired without any action by the government, and the

A.S.B.C.A. action became final in December, 1982.

The contracting officer failed to render a final decision

on quantum, and on July 27, 1983, J.E.T.S. timely filed a

notice of appeal and complaint limited to the issue of

the quantum of recovery to which it was entitled under

the Board’s earlier decision. This new case was docketed

as A.S.B.C.A. No. 28642.

While the second appeal was pending, on August 31,

1983, a 25 count indictment was issued against Barnette

and Gibbs, principal owners of ALLIED MANAGEMENT,

INC., which is J.E.T.S.’ parent corporation, against AL-

LIED, and against other related companies and individ-

uals.

The indictments dealt with (1) a laundry services con-

tract in the- Federal Republic of Germany; (2) a food

service contract at Ft. Lee, Virginia; (3) a food service

contract at McConnell Air Force Base, Kansas; and (4)

a laundry services contract at Ft. Lee, Virginia.

The indictment at no time mentioned or referred to the

Vandenberg contract.

In July, 1984, a jury in the United States District

Court for the Northern District of Florida returned ver-

dicts of guilty against the named defendants in the in-

dictment on various counts, none of which dealt with the

Vandenberg contract.

|

4

In early 1985, the government amended its answer in |

A.S.B.C.A. No. 28642, contending:

(1) Respondent agrees that appellant is entitled to

be paid for the reasonable value of its services

that were performed following the government’s

failure to exercise the option properly as the

Board previously ruled. However, it is respond-

ent’s position that the measure of the reasonable

value of services performed by appellant is

measured by the contract price. Appellant is

not entitled to additional costs or anticipatory

profit that it alleges.

(2) The government’s improper exercise of the op-

tion under the contract rendered the contract |

unenforceable. Notwithstanding, the contract is

valid to the extent it was performed. Therefore,

appellant is entitled only to the amount of

money agreed upon in the contract.

(3) Appellant initially entered into the contract by

falsely certifying itself as a small business when

in fact it was a large business. The contract

being a 100% small business set aside would

have precluded appellant from being awarded

the contract if it had not falsely certified itself

as a small business. Appellant has been con-

victed of numerous false claim violations con-

cerning its certificate as a small business. Ap-

pellant’s false certification renders the contract

void ab initio and entitles appellant as a matter

of law to no additional funds for any alleged

equitable adjustment.

(4) Failure to exercise an option could not be a con-

structive change under the contract since the

contract ceased to exist when the government

improperly exercised the option. However, to

the extent it was performed, the contract be-

came valid.

In April, 1985, J.E.T.S. moved for summary judgment

striking the four affirmative points raised by the govern-

5

ment. The government filed a cross-motion for summary

judgment in May, 1985.

On October 8, 1986, the United States Court of Appeals

for the Eleventh Circuit affirmed the District Court con-

viction of J.E.T.S.’ parent corporation and its owners.

United States vs. Barnette, 800 F.2d 1558 (11th Cir.

1986).

On January 21, 1987, the A.S.B.C.A. rendered its opin-

ion on the motions for summary judgment in A.S.B.C.A.

No. 28642:

1. It ruled that the government’s first, second

and fourth points mentioned above were without

merit.

2. It ruled that the contract was void ab initio

because of appellant’s false certification as a small

business.

3. It held that the government was entitled to

summary judgment and that the appellant had no

right of recovery either under the contract or under

a quantum valenbant/quantum meruit theory.

J.E.T.S., Inc., ASBCA No. 28642, 87-1 BCA (CCH)

719,569 (1987). J.E.T.S. filed an appeal to the United

States Court of Appeals for the Federal Circuit. The

matter was argued to the court on an agreed statement

in lieu of appendix, Appendix “B” appended hereto.

The Court of Appeals affirmed the action of the Board.

REASONS FOR GRANTING THE WRIT

I. THE BOARD HAD NO JURISDICTION TO RELITI-

GATE ENTITLEMENT

By its opinion granting summary judgment in

A.S.B.C.A. No. 26135, the Board specifically ruled

that the government had not exercised its option and that

therefore, either on the theory that there was no remain-

ing contract per se between the government and the ap-

pellant, or that there had been a constructive material

change to the contract, appellant was entitled to an equi-

Va

6

table adjustment and the only thing remaining to be

determined was the amount of that adjustment.

It is essential to recognize that the only issue litigated

in the earlier Board action was entitlement and, thus, if

there arose a dispute over quantum, this would (and

did) require an entirely new filing by J.E.T.S. Thus,

contrary to the finding of the Court of Appeals, Appen-

dix, page 7a, this was not a continuation of the same liti-

gation, but an entirely new action.

By its decision in A.S.B.C.A. No. 28642, the Board

reversed itself on the issue of entitlement, something it

had absolutely no jurisdiction to do because that issue was

res judicata and both the government and the Board were

precluded from relitigating that issue.

_ Res judicata and collateral estoppel serve the dual pur-

poses of protecting litigants from the burden of relitigat-

ing an identical issue with the same party or his privy

and of premeting judicial economy by preventing need-

less litigation. They prevent inconsistent decisions and

encourage reliance on adjudication. Parklane Hosiery

vs. Shore, 439 U.S. 322 (1979); Kremer vs. Chemical

Construction Corporation, 456 U.S. 461 (1982); Migra

vs. Warren City School District Board of Education, 465

U.S. 75 (1984). The Board had no jurisdiction to reliti-

gate entitlement.

Once the time for appeal has run, a final judgment is

res judicata without regard to the fact an appeal might

have been taken to a higher court. As recently stated in

Federated Department Stores vs. Moitie, 452 U.S. 394,

401 (1981):

The doctrine of res judicata serves vital public in-

terests beyond any individual judges’ ad hoe determi-

nation of the equities in a particular case. There is

simply “no principle of law or equity which sanctions

: the rejection . . . of the salutary principle of res

judicata.” The Court of Appeals’ reliance on “public

7

policy” is similarly misplaced. This Court has long

recognized that “public policy dictates that there be

an end of litigation; that those who have contested

an issue shall be bound by the result of the contest,

and that matters once tried shall be considered for-

ever settled as between the parties,’ Baldwin v.

Traveling Men’s Assn., 283 U.S. 522, 525 (19381).

The government cannot qualify for any exception to

the principle of issue preclusion under some colorable

claim that it did not know, and could not have known,

of the potential problems with J.E.T.S.’ certification that

it was “small.” In fact, as the indictment, conviction,

and appellate decision clearly point out, J.E.T.S.’ size was

challenged as early as 1979. Thus, there can be no ques-

tion that as of the date on which the Board granted

J.E.T.S.’ motion for summary judgment in August, 1982,

the government knew, or should have known, that J.E.T.S.

had been the subject of investigation and challenge as to

its size.

The government and the Board are thus bound by the

rules of res judicata and preclusion, and for the Board

to double back on itself as it did in the instant action is

legally intolerable, without any basis in law or in equity.

Sidney vs. Zah, 718 F.2d 1453, 1459 (9th Cir. 1983) ;

Town of Seabrook vs. New Hampshire, 738 F.2d 10, 11

(1st Cir. 1984); Lee vs. City of Peoria, 685 F.2d 196,

199, note 4 (7th Cir. 1982).

Il. THE GRANTING—AND AFFIRMANCE—OF SUM-

MARY JUDGMENT BASED ON J.E.T.S.”. PARENT’S

CONVICTION CONSTITUTED ABUSE OF DISCRE-

TION, PREJUDICIAL ERROR, AND DENIAL OF

DUE PROCESS

The A.S.B.C.A. opinion candidly states:

The present contract was not included in the in-

dictments and convictions.

87-1 BCA at 98,913.

8

The Court of Appeals opinion candidly states:

A major charge of the indictment was that in

obtaining four other government contracts, Allied

had falsely certified that it was a small business.

Two of those contracts were food service contracts

at other military bases and two others were laundry

service contracts at a military base and in the Fed-

eral Republic of Germany.

Appendix, pages 5a-6a.

J.E.T.S. stresses that the present contract was not

involved in the criminal case and that J.E.T.S. was

not a defendant in that case.

Although J.E.T.S. was not a party in the criminal

case, it was very much a part of the activities upon

which the criminal convictions were based. The

Court of Appeals described J.E.T.S. as “a wholly

owned subsidiary of Allied that performed govern-

ment service contracts throughout the world.”

As a wholly owned subsidiary of Allied, LETS.

appears to have functioned as Allied’s operating di-

vision and alter ego.

Appendix, pages 9a-10a.

_The criminal conviction thus would have estopped

Allied, Barnette, and Gibbs from denying before the

Board that they had misrepresented to the government

that the contractors for the four other contracts in-

volved in the criminal proceedings were small busi-

nesses, since that question had been “distinctly put in

issue and directly determined” in the criminal case.

Those four contracts were similar to the contract

in the present case. Two were food service contracts,

and two were laundry service contracts. All of them

were executed and performed at the same time as

the present contract. In all four of them, the cer-

tificates of small business qualification were false

because, in determining the size of the contractor,

the receipts of affiliates of the contractor were ig-

nored in violation of the regulation requiring those

receipts to be included.

Appendix, page 10a.

9

Apparently, neither the Board nor the Court of Ap-

peals could directly cope with the fact that Allied was

convicted in contracts other than those at Vandenberg

Air Force Base.

The Supreme Court has clearly held that a prior

conviction may work an estoppel in favor of the govern-

ment, but such estoppel extends only to questions dis-

tinetly put in issue and directly determined in the crimi-

nal prosecution. Emich Motors Corporation vs. General

Motors Corporation, 340 U.S. 558, 569-572 (1951) ;

Frank vs. Mangum, 237 U.S. 309, 334 (1915); Sealfon

vs. United States, 332 U.S. 575 (1948).

In United States vs. Uzzell, 648 F. Supp. 13862 (D.D.C.

1986), the government brought a civil action under the

False Claims Act against defendants previously convicted

of criminal conspiracy to defraud the government by false

claims. The court held that a trial court must look to

the record, the pleadings, the evidence submitted, the jury

instructions, and any opinions of the court in aid of its

determination as to whether or not the question under

consideration had been placed in issue and fairly liti-

gated in the criminal action.

In Drum vs. Nasutt, 648 F. Supp. 888, 897-898 (E.D.

Pa., 1986), aff'd. mem., 831 F.2d 286 (3d Cir. 1987),

the court further amplified the criteria necessary to raise

the collateral estoppel issue:

1. The issue decided in the prior adjudication must

be identical with the one presented in the later

action.

2. There must have been a final judgment on the

merits.

3. The party against whom the doctrine is as-

serted must have been a party or in privity with a

party to the other action.

4. The party against whom it is asserted had a

full and fair opportunity to litigate the specific issue

in question in the prior litigation, and

5. The issue decided was essential to the judgment.

10

Here, of course, neither the A.S.B.C.A. nor the Court

of Appeals reviewed the transcript of the proceedings, the

findings of the jury, or anything else of a direct nature in-

volved in the criminal action against Allied. The sole sup-

port for the position espoused by the A.S.B.C.A. and af-

firmed by the Court of Appeals were the indictment and

the Appeals Court’s per curiam opinion affirming the

criminal judgment. Since the right of appellate review

is limited to questions of law and does not extend to

matters of fact, Duncan vs. Atchison, T. and S.F.R. Co.,

72 Fed. 808 (C.A. 9th 1896); Bond vs. Brown, 12 How.

(53 U.S.) 254 (1851); Ralston Purina Company vs. Novak,

111 F.2d 631 (8th Cir. 1940), there is no conceivable

way in which the A.S.B.C.A. could have extracted facts

from the appellate decision and grafted them onto its

own opinion denying J.E.T.S. recovery.

Unless the examination of the entire record removes

all questions concerning the criteria for estoppel, there

can be no estoppel created by the criminal conviction,

De Sollar vs. Hanscome, 158 U.S. 216 (1895); Washing-

ton Gas Light Company vs. District of Columbia, 161 U.S.

316 (1896).

Ill. WHETHER OR NOT THE PETITIONER WAS A

SMALL BUSINESS WAS NOT AT ISSUE

Even assuming, without conceding, that the government

and the Board could somehow have acquired jurisdiction

despite the clear bar of res judicata in this case, the

A.S.B.C.A.’s reasoning, equating the criminal conviction

with this contract, fails on several counts:

1. There was no_ specific determination that

J.E.T.S. was “large” for this specific contract.

2. J.E.T.S. never litigated the issue of whether or

not the receipts of J.E.T.S. WAESCHEREI, GmbH,

ALLIED, or OLD DOMINION, which are sepa-

rate but related corporations, could be chargeable to

J.E.T.S., INC.

11

3. The Board made no finding of alter ego as be-

tween J.E.T.S., INC., and ALLIED, J.E.T.S. WAE-

SCHEREI, GmbH, or OLD DOMINION.

4. A statement by the Board that ALLIED, the

parent, continued to bid on small business set aside

contracts, does not furnish proof for this contract

that J.E.T.S., INC., a separate corporation, must, of

necessity, be charged with the errors of its parent.

The cases of United States vs. Mississippi Valley Gen-

erating Company, 364 U.S. 520 (1961), and K & R Engi-

neering Company, Inc. vs. United States, 616 F.2d 469

(Ct. Cl. 1980), cited by the Court of Appeals, Appendix,

page 8a, are distinguishable and irrelevant because:

1. Each of those cases dealt with direct conflict of

interest between government officials and the con-

tractors with regard to specific contracts.

2. In neither case had there been a final, binding

decision in favor of the contractor, which would re-

move the issue from the jurisdiction of the determin-

ing board.

The only issue before the A.S.B.C.A. was quantum,

since, as a matter of law which became final and re-

mained unappealed by the government, entitlement had

been determined in the earlier hearing and thus became

the law of the case, Pubali Bank vs. City National Bank,

777 F.2d 1340 (9th Cir. 1985); Waggoner vs. Dalliare,

767 F.2d 589 (9th Cir. 1985), cert. denied, 475 U.S.

1064 (1986) ; Cardwell vs. Kurtz, 765 F.2d 776 (9th Cir.

1985).

The Court of Appeals citations to United States vs.

Turtle Mountain Band of Chippewa Indians, 612 F.2d

517, 520 (Ct. Cl. 1979) ; Schwartz vs. N.M.S. Industries,

Inc., 575 F.2d 558, 554 (5th Cir. 1978); White vs.

Murtha, 377 F.2d 428, 432 (5th Cir. 1967); Smith

International, Inc. vs. Hughes Tool Company, 759 F.2d

1572, 1576 (Fed. Cir.), cert. denied, 474 U.S. 827

12

(1985), and Gindes vs. United States, 740 F.2d 947,

950 (Fed. Cir.), cert. denied, 469 U.S. 1074 (1984),

Appendix, pages 7a-8a, are misplaced. The Court of Ap-

peals erroneously concluded that the second Board appeal

was but a further step in the litigation of the same case.

It was not. It was an entirely new action. Since there

was never any attempt to set aside the initial determina-

tion of the A.S.B.C.A., it worked a denial of due process

and a concomitant deprivation of J.E.T.S., INC’s., prop-

erty to go around to the back door when the front door

had not been opened.

CONCLUSION

In conclusion, Petitioner J.E.T.S., INC., respectfully re-

quests that a Writ of Certiorari issue to review the judg-

ment of the United States Court of Appeals for the Fed-

eral Circuit.

Respectfully submitted,

HuGo N. GERSTL

GERSTL & GORMAN, INC.

Attorneys at Law

33 Soledad Drive

Monterey, CA 93940

Telephone: (408) 649-0666

Attorneys for Petitioner

J.E.T.S., Inc.

Dated: May 11, 1988

APPENDICES

la

APPENDIX A

UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

87-1269

J.E.T.S., INC.,

Appr llant,

THE UNITED STATES,

A ppt llee.

Hugo N. Gerstl, of Gerstl] & Gorman, Monterey, Cali-

fornia, argued for appellant.

J. Keith Burt. of the Commercial Litigation Branch,

Department of Justice, argued for appellee. With him

on the brief were Richard K. Willard, Assistant Attor-

ney General, David M. Cohen, Director, and Mary Mitch-

elson, Assistant Director.

Appealed from: Armed Services Board of Contract

Appeals.

Za

UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

87-1269

J.E.T.S., INC.,

Appellant,

THE UNITED STATES,

Appellee,

DECIDED: February 11, 1988

Before MARKEY, Chief Judge, FRIEDMAN, Circuit

Judge, and BALDWIN, Senior Circuit Judge.

FRIEDMAN, Circuit Judge.

This is an appeal by a government contractor from a

decision of the Armed Services Board of Contract Ap-

peals (Board: denying the contractor's claim for an

equitable adjustment in the contract price. The Board

previously had held that the contractor was entitled to

such an adjustment and remanded the case to the con-

tracting officer to determine the amount thereof. After

the contracting officer had denied any award and while

the contractor’s appeal from that ruling was pending be-

fore the Board, a corporation of which the contractor was

a wholly-owned subsidiary and the two principals of that

corporation were indicted and convicted of various of-

fenses against the government. A major element of the

criminal case was that they had falsely certified that the

coporation Was a small business, for which both the other

3a

contracts involved in the criminal case and the contract

in the present case were set aside. On the basis of the

convictions, the Board held that the contractor was not

entitled to recover. We affirm.

I

A. On April 1, 1980, the United States Air Force

entered into a contract with the appellant, J.E.T.S., Inc.,

under which J.E.T.S. would furnish all necessary per-

connel for full food service management at an air base.

The contract was for one year. The government had the

option to extend the contract for two subsequent years

at the same price by giving specified notices.

At the close of the first year of performance, the gov-

ernment. on March 31, 1981, exercised its option to ex-

tend the contract for another year at the same price.

The government's written exercise of the opt ion stated:

Funds are not presently available for this procure-

ment. The Government obligation is contingent upon

the availability of appropriated funds from which

payment for the contract purposes can be made. No

legal liability on the part of the Government for

payment of any money shall arise unless and until

funds are made available to the Contracting Officer

for this procurement and notice of such availability,

to be confirmed in writing by the Contracting Of-

ficer, is given to the contractor.

In response to J.E.T.S.’ request for an immediate rul-

ing on whether the government properly had exercised its

option, the contracting officer ruled on May 5, 1981, that

the exercise was proper. J.E.T.S. performed the contract

for the second year under protest, stating that it @x-

pected to be paid the reasonable value of its services.

The government paid it at the contract price.

ee

4a

On J.E.T.S.’ appeal from the contracting officer’s deci-

sion, the Board held that the government’s exercise of the

option was invalid. The Board stated:

It is well settled that in order for the Government to

properly exercise an option, its acceptance of the

offer must be unconditional and in exact accord with |

the terms offered. (Citations omitted.) Here the

purported execution of the option included the avail-

ability of funds clause and made the execution con-

ditional upon the subsequent availability of funds .

for performance of the contract and written notice

to appellant of such availability. It is undisputed

that funds were not available for performance dur-

ing the option period on or before the date for ac-

ceptance of the option, 15 April 1981, nor by the

date of commencement of the second year of the con-

tract, 1 May 1981.

... Appellant’s continued performance constituted

a constructive change under the contract for which

it is entitled to an equitable adjustment. The appeal

is sustained and the matter is remanded to the con-

tracting offier to negotiate the amount of such ad-

justment.

J.E.T.S., Inc., 82-2 B.C.A. (CCH) 9 15, 986, at 79,274

(1982).

While the appeal before the Board was pending, the

government exercised the option to renew the contract

for a third year at the original price. J.E.T.S. responded

that the government had not validly exercised the option

for the first extension, that accordingly the contract was

no longer in effect, and that the second option therefore

could not be exercised. J.E.T.S. continued to perform the

contract under protest through the third year, and the

government continued to pay J.E.T.S. at the contract

price.

5a

Following the decision of the Board, J.E.T.S. filed with

the contracting officer claims for an equitable adjustment

for the second and third years of the contract. When

the contracting officer failed to issue a decision within

the time specified in the Contract Disputes Act of 1978,

41 U.S.C. § 605(c) (1) (1982), J.E.T.S. filed an appeal

with the Board. (The contracting officer subsequently

denied J.E.T.S.’ claim in its entirety.)

B. Under the Small Business Act, 15 U.S.C. § 631

(1982), certain government contracts are set aside for

smail businesses. A small business is ‘one which is in-

dependently owned and operated and which is not domi-

nant in its field of operation.” Jd. § 632. Under regula-

tions of the Small Business Administration explaining

when a business is “small,” the focus for service indus-

tries is on annual receipts, and businesses with annual

receipts greater than specified_amounts are not “small.”

13 C.F.R. §§121.1-121.13 (1986). In determining

whether a service business is “small,” the average an-

nual receipts for the past three years of the company

and its affiliates will be considered. Jd. § 121.2(a)-(c).

The food service management contract that J.E.T\S.

entered into was 100 per cent set aside for small busi-

ness. Before obtaining the contract, J.E.T.S. certified to

the Air Force that it was a small business.

C. While the second appeal to .he Board was pending,

Thomas F. Gibbs, Leo J. Barnette, Allied Management

Corporation (Allied), and others were indicted for con-

spiracy to defraud the government, making false state-

ments to the government, and mail fraud. J.E.T.S. is a

wholly-owned subsidiary of Allied. Larry Barnette was

the president and principal stockholder of Allied, and

Thomas Gibbs was the vice president and minority stock-

holder.

A major charge of the indictment was that in obtain-

ing four other government contracts, Allied had falsely

6a

certified that it was a small business. Two of those con-

tracts were food service contracts at other military bases

and the two others were laundry service contracts at a

military base and in the Federal Republic of Germany.

These contracts were entered into and performed at vari-

ous times between January 1, 1977 and August 1982.

The jury convicted the defendants on various charges,

and the court of appeals affirmed. United States v. Bar-

nette, 800 F.2d 1558 (11th Cir. 1986), cert. denied, 107

S. Ct. 1578 (1987). In a section of its opinion captioned

“The Small Business Set Aside Program,” the court of

appeals heid:

[T]he government demonstrated that Allied and its

affiliates had become “large” for SBA size purposes

for most types of contracts. ...

Notwithstanding the size of the Allied conglom-

erate, Allied, through Barnette and Gibbs, continued

to submit bids on contracts set aside for small busi-

ness concerns. From 1978 through 1981, Allied

falsely certified on each bid document that it was

small, and thus eligible to bid on contracts set aside

for small businesses.

Id. at 1565.

D. Following the court of appeals affirmance of the

convictions, the government moved before the Board for

summary judgment. The Board granted the motion and

denied J.E.T.S.’ appeal. The Board stated:

[T]here is no genuine issue of material fact con-

cerning the question of appellant’s size or whether

during that period appellant was aware that it was

a large corporation and knowingly certified to the

contrary. The conviction resolved these questions.

Therefore, appellant is estopped from now denying

that it knowingly and willfully made false, fictitious

and fraudulent statements by certifying appellant

7a

was a small business when it submitted its bid for

this small business set aside contract in November

1979.

J.E.T.S., Inc., 87-1 B.C.A. (CCH) 19,569, at 98,916

(Jan. 16, 1987).

The Board concluded:

[T]he bad faith of appellant in securing the award

made the award voidable, if not void. This was not

known to the contracting officer until after comple-

tion of the contract and the option period before us.

In its pleadings and motion for summary judgment

the Government has, in effect, asserted its avoidance

of the contract. Having done so, it would pertain

not only to the contract but also to the option period

before us. We also recognize that the question before

us at this time is not entitlement to recover but the

amount which the appellant is entitled to recover.

However, to permit recovery of any further monies

under the circumstances would be an affront to the

integrity of the federal procurement process.

Id. at 98,917.

II

J.E.T.S. contends that the earlier decision of the Board

that it was entitled to an equitable adjustment because

the government had made a constructive change in the

contract was res judicata concerning its right to recovery,

that the only issue open for the Board to decide in the

second appeal was the amount of recovery, and that the

Board’s decision in the second appeal was an imper-

missible reversal of its prior decision.

Since the second appeal was but a further step in the

litigation of the same case, the governing principle for

determining what issues were open to the Board is not

res judicata, but the law of the case. United States v.

Turtle Mountain Band of Chippewa Indians, 612 F.2d 517,

re

8a

520 (Ct. Cl. 1979). “Thus, ‘once a case has been decided on

appeal, the rule adopted is to be applied, right or wrong,

absent exceptional circumstances, in the disposition of

the lawsuit.’” Id. (quoting Schwartz v. NMS Indus.,

Inc., 575 F.2d 558, 554 (Sth Cir. 1978)). There are

three “exceptional circumstances” that justify a depar-

ture from the law of the case: ‘“‘[T]he evidence on a

subsequent trial was substantially different, controlling

authority has since made a contrary decision of the law

applicable to such issues, or the decision was clearly er-

roneous and would work a manifest injustice.’” Jd. at

521 (quoting White v. Murtha, 377 F.2d 428, 432 (5th

Cir. 1967)). See also Smith Fnt’l, Inc. v. Hughes Tool

Co., 759 F.2d 1572, 1576 (Fed.Cir.), cert. denied, 474

U.S. 827 (1985); Gindes v. United States, 740 F.2d 947,

950 (Fed. Cir.), cert. denied, 469 U.S. 1074 (1984).

The Board’s decision in the first appeal was “clearly

erroneous” and to follow it “would work a manifest in-

justice.” The contract which, according to the Board’s

decision in the first case, the government constructively

had changed, was procured by and therefore permeated

with fraud. As discussed in part III below, J.E.T.S. ob-

tained this contract by knowingly falsely stating that it

was a small business. Had it stated the truth about its

size, it would not have received the contract. A govern-

ment contract thus tainted from its inception by fraud

is void ab initio, like the government contracts held void

because similarly tainted by a prohibited conflict of inter-

est in United States v. Mississippi Valley Generating

Co., 364 U.S. 520 (1961), and K & R Eng’g Co. v. United

States, 616 F.2d 469 (Ct. Cl. 1980).

If in the first appeal the Board had been aware of

J.E.T.S.’ fraud in obtaining the contract, the Board would

not have held that J.E.T.S. was entitled to an equitable

adjustment for the government’s constructive change in

the contract. The Board correctly stated in the present

appeal, “to permit recovery of any further monies under

9a

the circumstances would be an affront to the integrity of

the federal procurement process.” See Mississipp Valley,

364 U.S. at 564-65. “The protection of the integrity of

the federal procurement process from the fraudulent ac-

tivities of unscrupulous government contractors,” K & R

Eng’g, 616 F.2d at 476, fully supported—indeed, re-

quired—denial of J.E.T.S.’ claim for additional compen-

sation once J.E.T.S.’ fraud in obtaining the contract was

disclosed. This is so even though, when the fraud was not

yet known, the Board earlier had determined that

J.E.T.S. was entitled to additional money.

Moreover, since the facts concerning J.E.T.S.’ fraud

were not known at the time of the first Board decision

and became known only during the pendency of the sec-

ond appeal, the case also comes within the exception

covering the situation when “the evidence on a subsequent

trial was substantially different.” Although there was no

subsequent trial, the evidence before the Board on the

second appeal was substantially different from that be-

for it on the first appeal, since it was only on the second

appeal that the fraudulent procurement of the contract

was disclosed.

Ill

J.E.T.S. further contends that the Board improperly

relied on the criminal convictions of its corporate parent

and the two principals as a basis for concluding that the

contract was void or voidable because tainted by J.E.T.S.’

fraud in falsely representing that it was a small business.

J.E.T.S. stresses that the present contract was not in-

volved in the criminal case and that J.E.T.S. was not a

defendant in that case.

Although J.E.T.S. was not a party in the criminal case,

it was very much a part of the activities upon which the

criminal convictions were based. The court of appeals

described J.E.T.S. as “a wholly owned subsidiary of

Allied that performed government service contracts

10a

throughout the world,” 800 F.2d at 1560, and as “part of

the Allied conglomerate.” 800 F.2d at 1563. The court

referred to “Allied, doing business as J.E.T.S.” 800 F.2d

at 1564. The court noted that during the years involved,

Gibbs, who signed the present contract and certified that

J.E.T.S. was a small business, filed other false statements

on behalf of J.E.T.S. with respect to J.E.T.S.’ size. 800

F.2d at 1565. As a wholly owned subsidiary of Allied,

J.E.T.S. appears to have functioned as Allied’s operating

division and alter ego.

“It is well established that a prior criminal conviction

may work an estoppel in favor of the government in a

subsequent civil proceeding,’ but the “estoppel extends

only to questions ‘distinctly put in issue and directly de-

termined’ in the criminal prosecution.” Emich Motors

Corp. v. General Motors, 340 U.S. 558, 568-69 (1951).

The criminal conviction thus would have estopped Allied,

Barnette, and Gibbs from denying before the Board that

they had misrepresented to the government that the con-

tractors for the four other contracts involved in the crim-

inal proceedings were small businesses, since that ques-

tion had been “distinctly put in issue and directly deter-

mined” in the criminal case.

Those four contracts were similar to the contract in

the present case. Two were food service contracts, and

two were laundry service contracts. All of them were

executed and performed at the same time as the present

contract. In all four of them, the certificates of small

business qualification were false because, in determining

the size of the contractor, the receipts of affiliates of the

contractor were ignored in violation of the regulation re-

quiring those receipts to be included. The other false

statements that Gibbs filed with respect to the size of

J.E.T.S. had the same flaw of failure to include the

receipts of affiliates. The record also showed that in 1980,

Gibbs told “an employee not to refer to the German

laundry contract in another bid because if J.E.T.S. listed

lla

the laundry contract ‘in the experience section, it would

have to be included in the gross income also [sic].’” 800

F.2d at 1565.

Considering all the circumstances, we cannot say that

the Board erred in concluding that J.E.T.S. had com-

mitted fraud in obtaining this contract by knowingly

falsely certifying that it was a small business. Neither

in its response before the Board to the government’s mo-

tion for summary judgment nor in its brief before this

court did J.E.T.S. assert that it was a small business

when it obtained the contract or contend that it could

show at a hearing that it filed an accurate certification.

The Board correctly concluded that there was “no genuine

issue as to any material fact” (Rule 56(c), Federal Rules

of Civil Procedure) that precluded summary judgment

and that because the contract was fraudulently obtained,

the government was entitled to summary judgment deny-

ing J.E.T.S.’ appeal.

CONCLUSION

The decision of the Board denying J.E.T.S.’ appeal is

AFFIRMED.

12a

UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

87-1269

J.E.T.S., INC.,

Appellant,

Vv.

THE UNITED STATES,

Appellee.

JUDGMENT

On Appeal from the Armed Services Board

of Contract Appeals in Case No(s). 28642

This CAUSE having been heard and considered, it is

ORDERED and ADJUDGED: AFFIRMED

ENTERED BY ORDER OF THE COURT

s/ Francis X. Gindhart

Clerk

Dated Feb. 11, 1988

l3a

APPENDIX B

UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

87-1269

J.E.TS., INC.,

Appellant,

v.

THE UNITED STATES,

Appellee.

AGREED STATEMENT IN LIEU OF APPENDIX

Huco N. GERSTL, ESQUIRE

GERSTL & GORMAN, INC.

Attorneys at Law

33 Soledad Drive

Monterey, California 93940

Telephone: (408) 649-0666

Attorneys for Appellant

l4a

COME NOW appellant, J.E.T.S., Inc., and appellee,

United States of America, and pursuant to Rule 6 of the

United States Court of Appeals for the Federal Circuit

Procedural Handbook, stipulate that the following con-

stitutes an agreed statement of the case in lieu of the

record:

Appellant, J.E.T.S., Ine. (hereinafter called ‘“appel-

lant” or “J.E.T.S.”), is a Florida corporation with its

principal place of business in Jacksonville, Florida. The

United States of America, acting through Base Contract-

ing Division, Vandenberg Air Force Base, California

(hereinafter called “Air Force”, “government” or “appel-

lee’), awarded Contract No. F04684-80-D-0007 to appel-

lant on 1 April 1980. The contract required the appellant

to furnish all necessary supervisory, administrative and

direct personnel for full food service management at

Vandeberg AFB. The contract was a firm fixed price

contract in connection with the basic year and contained

two option years, with the government given the option

to extend the contract.

The contract contained a “change” clause and an “op-

tion” clause. The “option” clause provided:

This contract is renewable, at the option of the gov-

ernment, by the Contracting Officer giving written

notice of renewal to the contractor at least 15 days

before this contract is to expire, provided that the

Contracting Officer shall have given preliminary no-

tice of the government’s intention to renew at least

60 days before this contract is to expire. (Such

preliminary notice will not be deemed to commit the

government to renewals.) If the government exer-

cises this option for renewal, the contract as renewed

shall be deemed to include this option provision.

However, the total duration of this contract, includ-

ing the exercise of any options under this clause,

shall not exceed three years.

15a

J.E.T.S. commenced performance under the contract

on 1 May 1980, and completed performance of the basic

year on 30 April 1981.

On or about 23 March 1981, the Contracting Officer

furnished to J.E.T.S. Modification to Contract No.

P-00004 dated 27 February 1981, effective 1 May 1981,

purporting to unilaterally exercise the first year option

under the contract and demanded that J.E.T.S. perform

the contract services for an additional year for the price

set forth in the contract. The purported exercise of the

option by the government was expressly conditioned upon

the availability of appropriated funds from which pay-

ment for the contract purposes could be made. The mod-

ification further provided that:

No legal liability on the part of the government for

payment of any money shall arise unless and until

funds are made available to the Contracting Officer

for this procurement and notice of such availability,

to be confirmed in writing, by the Contracting Offi-

cer, is given to the contractor.

On April 3, 1981, J.E.T.S. acknowledged receipt of the

modification. Although J.E.T.S. agreed to continue per-

formance of the work covered by the contract, J.E.T.S.

expressly advised the Contracting Officer that it consid-

ered his directions to be unauthorized, improper, and a

constructive change in the contract; that J.E.T.S.’ con-

tinued performance under the contract would be under

protest, and that J.E.T.S. would expect to be paid for

such work the reasonable value of its services, as opposed

to the government contract price, together with general

and administrative (G & A), and a reasonable profit.

Finally, J.E.T.S. advised the Contracting Officer that it

would continue to perform the contract services as di-

rected by him under protest until resolution of the claim

as required by the disputes clause in the contract and the

provisions of the Contract Disputes Act of 1978. J.E.T.S.

requested the immediate issuance of a final decision on

l6a

the question of whether or not the Contracting Officer

properly exercised the first year option under the con-

tract.

On 5 May 1981, the Contracting Officer rendered his

final decision finding that the government had validly

exercised the option granted and contained in the con-

tract.

On 15 June 1981, J.E.T.S. appealed the final decision

of the Contracting Officer to the Armed Services Board

of Contract Appeals. On 24 June 1981 the ASBCA dock-

eted this appeal as ASBCA No. 26135. On 21 September

1981 J.E.T.S. filed an amended complaint in ASBCA No.

26135 wherein it expressly contended that the attempted

exercise by the government of the first year option was

invalid for the reason that the proposed modification was

expressly conditioned upon “the availability of appro-

priated funds from which payment for the contract pur-

poses can be made” and further provided that “no legal

liability on the part of the government for payment of

any money shall arise unless and until funds are made

available to the Contracting Officer for this procurement

and notice of such availability to be confirmed in writing

by the Contracting Officer is given to the contractor’,

thus rendering the purported “exercise” conditional and

a legal nullity.

The issue was joined by the government.

Thereupon J.E.T.S. and the government each filed mo-

tions for summary final judgment.

On 4 August 1982 the Armed Services Board of Con-

tract Appeals in ASBCA No. 26135 sustained the appeal

of J..T.S., and in its decision entitled “Opinion by Ad-

ministrative Judge Burg on Cross- motions for Summary

Judgment” held in pertinent part:

It is well settled that in order for the government

to properly exercise an option, its acceptance of the

|

17a

offer must be unconditional and in exact accord with

the terms offered. (citations omitted). Here the

purported execution of the option included the avail-

ability of funds clause and made the execution condi-

tional upon the subsequent availability of funds for

performance of the contract and written notice to

appellant of such availability. It is undisputed that

funds were not available for performance during the

option period on or before the date for acceptance

of the option, 15 April 1981, nor by the date of

commencement of the second year of the contract,

1 May 1981.

Having concluded that the option exercise was in-

valid because it was conditional and not in accord

with the exact terms of the contract, we need not

consider whether it also failed because the govern-

ment failed to give the proper preliminary notice of

its intent to exercise the option.

The government’s motion for summary judgment is

denied. The appellant’s motion for summary judg-

ment is granted. Appellant’s continued performance

constituted a constructive change under the contract

for which it is entitled to an equitable adjustment.

The appeal is substained and the matter is remanded

to the Contracting Officer to negotiate the amount

of such adjustment.

By letter dated 8 January 1982 and prior to the deci-

sion of the Board in ASBCA No. 26135, the Contracting

Officer furnished J.E.T.S. with “preliminary notice” of

the government’s intention to renew the subject contract

for the second option year covering the period from 1

May 1982 to 30 April 1983 in accordance with the option

provision contained in the contract.

By letter dated 18 January 1982 appellant acknowl-

edged receipt of the government’s “preliminary notice”

of its intent to exercise the second year option under the

contract and stated that:

) . :

18a

Essentially, it is the position of J.E.T.S., Ine. that

the government failed to timely furnish the prelimi-

nary notice of intent to exercise the first one year

option under the contract and further, thereafter,

failed to properly exercise the option in accordance

with the terms of the contract. As a result, it is

the position of J.E.T.S., Inc. that the referenced con-

tract, including the options contained therein, is no

longer in force or effect and that J.E.T.S. is entitled

to be compensated for the services it is performing

at the demand and insistence of the Contracting

Officer on the basis of the cost of those services, plus

its G & A and a reasonable profit. Accordingly,

J.E.T.S. disputes the government’s right to exercise

the option, for which you have given the preliminary

notice.

J.E.T.S., Ine. will continue to perform the services

covered by the referenced contract under protest un-

til a resolution of the dispute by the Board of Con-

tract Appeals. The continued performance by

J.E.T.S. should not be taken by you as a waiver of

the rights asserted by J.E.T.S. in its appeal.

The government thereafter purported to exercise the

second year option under the contract and directed

J.E.T.S. to perform the contract services with the prices

set forth in the contract. J.E.T.S. agreed to continue

performance of the contract services during the second

year option of the contract under protest, pending resolu-

tion of the then pending appeal, as provided in the Con-

tract Disputes Act of 1978. To do otherwise would have

subjected J.E.T.S. to the risk of a default termination.-

The ABSCA decision in 26135 held that the attempted

exercise of the first year option under the contract by

the Air Force was invalid and that J.E.T.S.’s continued

performance constituted a constructive change under the

contract for which J.E.T.S. was entitled to receive an

equitable adjustment. The Board remanded the appeal

19a

to the Contracting Officer with directions to negotiate the

amount of the contract adjustment.

As a matter of contract and as a matter of law the

right of the government to exercise the second year option

under the contract was dependent upon a finding that

the government properly and validly exercised the first

year option under the contract. Thus, when the Board

determined that the government failed to properly exer-

cise the first year option under the contract, the contract,

as such, including the option provision, was not extended

and there were no further options available for the third

year.

Nevertheless, the appeal not having been determined and

at the express direction of the Contracting Officer, J.E.T.S.

performed the contract services for the first and second

option years of the contract covering the period of 1 May

1981 to and incliding 30 April 1983 under protest and

with a complete reservation of rights to-J.E.T.S. to seek

an equitable adjustment in the contract price for such

period in accordance with the holding of the ASBCA in

number 26135.

Thereafter, the time for appealing the decision of the

Board in ASBCA No. 26135 expired and the decision

became final. Appellant, through its attorney, prepared

and filed with the Contracting Officer J.E.T.S.’ claim for

an equitable adjustment to the contract dated 21 Decem-

ber 1982 covering the period commencing 1 May 1981

through 30 November 1982. Subsequently that claim for

equitable adjustment was amended to cover the period

extending through 30 April 1983. The claim was prop-

erly certified as required by the Contract Disputes Act

of 1978.

On 27 July 1983 J.E.T.S. filed its notice of appeal ap-

pealing from the failure of the Contracting Officer to

issue a final decision within the time required by the

Contract Disputes Act. Subsequent to the filing of ap-

pellant’s notice of appeal, the Contracting Officer issued

20a

his final decision dated 28 July 1983 denying appellant’s

claim in its entirety without negotiation or discussion in

any manner or form.

The appeal was given ASBCA docket number 28642

and it was from a decision on a dispositive motion that

the instant appeal is based.

J.E.T.S. filed a complaint on 6 December 1983. The

government, after extension requests to file answer, filed

its answer on 24 January 1984.

The initial contract was a 100% small business set-

aside. J.E.T.S. certified to the United States that it was

a small business.

On August 31, 1983, tr grand jury of the United

States District Court for the Middle District of Florida,

Jacksonville Division, returned a 25 count indictment

against Larry D. Barnette, Thomas F. Gibbs, Leo J.

Barnette, Judge A. Causey, Murray Sentner, Allied

Management Corporation dba J.E.T.S., Ine. and Jets

Services, Inc. and Jets Venture Capital Corporation.

The indictment at no time mentioned the Vandenberg

contract. The indictments dealt with the following spe-

cific contract activities:

1. A laundry services contract for the Federal Re-

public of Germany;

2. A food service contract at Fort Lee, Virginia;

3. A food service contract at McConnell AFB, Kan-

sas; violations concerning its certificate as a small busi-

ness. Appellant’s false certification as a small business

in a 100% small business set-aside procurement renders

the contract void ab initio and entitles appellant as a

matter of law to no additional funds for any alleged

equitable adjustment.

4. Failure to exercise an option could not be a con-

structive change under the contract since the contract

2la

ceased to exist when the government improperly exercised

the option. However, to the extent it was performed the

contract became valid.

On 16 April 1985 appellant J.E.T.S. moved for sum-

mary judgment striking the respondent’s affirmative posi-

tion. A_copy of that motion is attached hereto, designated

Exhibit “A” and incorporated herein by reference.

On 20 May 1985 the government filed a cross-motion

for summary judgment and filed its brief. A copy of

the cross-motion is attached hereto, designated Exhibit

“B”’ and incorporated herein by reference.

The issues were well briefed by both sides.

On October 8, 1986, the United States Court of Ap-

peals for the Eleventh Circuit affirmed the judgment of

the United States District Court of Appeal. A copy of

the decision is appended hereto, designated Exhibit “C”’

and incorporated herein by reference.

The defendants in that case are still pursuing various

avenues of appeal. P

On 21 January 1987, the Armed Services Board of

Contract Appeals, the Honorable Ruth C. Burg, Admin-

istrative Judge, writing the lead opinion which was con-

curred in by the Honorable Daniel M. Arons, Admin-

istrative Judge, Acting Chairman, Armed Services Board

of Contract Appeals, and the Honorable Harris J.

Andrews, Jr., Administrative Judge, Acting Vice-

Chairman, Armed Services Board of Contract Appeals,

rendered an opinion on the government’s motion for sum-

mary judgment and appellant’s motion for Summary

judgment. A copy of that opinion is appended hereto,

designated Exhibit “D” and incorporated herein by ref-

erence.

In that decision, the Board held that the government’s

arguments pursuant to items 1, 2 and 4 are without

merit.

22a

However, the Board held that appellant’s contract was

void ab initio because of its false certification as a small

business on a 100% small business set-aside contract

and, in so doing, granted the government’s motion for

summary judgment and denied the appeal and the ap-

pellant’s motion for summary judgment.

Appellant timely filed this appeal and the matter is

now properly before this court.

IT IS STIPULATED THAT THIS DOCUMENT, IN-

CLUDING EXHIBITS “A” THROUGH “D”, INCLU-

SIVE, AND THE NOTICE OF APPEAL AND AP-

PEAL FROM DECISION OF THE ARMED SERVICES

BOARD OF CONTRACT APPEALS CONSTITUTE A

SETTLED STATEMENT OF THE FACTS OF THIS

CASE AND CONSTITUTE A SUFFICIENT RECORD

FROM WHICH A DECISION MAY BE RENDERED

BY THIS COURT.

DATED:

DAvID M. COHEN, Director

ORALLY AGREED ON

BY TELEPHONE

WiTH J. KEITH Burt

Trial/ Appellate Attorney

Commercial Litigation Branch,

Civil Division, Department of

Justice, Washington, D.C. 20530

Attorney for Appellee

THE UNITED STATES

DATED: 9/22/87

GERSTL & GORMAN, INC.

By Hugo N. Gerstl

Huco N. GERSTL

33 Soledad Drive

Monterey, California 93940-6093

Attorney for Appellant

23a

PROOF OF SERVICE BY MAIL

I am a citizen of the United States and a resident of

the County of Monterey. I am over the age of eighteen

(18) years and not a party to the within, above-entitled

action. My business address is 33 Soledad Drive, Monte-

rey, California. On 9/22, 1987, I served the within

AGREED STATEMENT IN LIEU OF APPENDIX on

the other party(s) in said action by placing a true copy

thereof enclosed in a sealed envelope with postage thereon

fully prepaid, in the United States Postal Service mail-

box at Monterey, California, addressed as follows:

Recorder

Armed Services Board of Contracts Appeals

200 Stovall Street

Alexandria, Virginia 22332-0700

Office of the Trial Counsel

Office of the Staff Judge Advocate

Air Force Logistics Command, JAB

Wright-Patterson AFB

Dayton, Ohio 45433-5000

Attention: Mark E. Landers, Esquire

David M. Cohen, Director

Commercial Litigation Branch

Civil Division

Department of Justice

Washington, D.C. 20530

Linda Maranda, Trial Counsel

Commercial Litigation Branch

550 11th Street, N.W.

Todd Building, Room 716

Washington, D.C. 20530

I, Kathleen Whitehurst, declare under penalty of per-

jury that the foregoing is true and correct. Executed on

9/22, 1987 in Monterey County, California.

/s/

KATHLEEN WHITEHURST