Assume gov't suspended a contract, which later turns out to have been a breach. For a while thereafter, both parties continue to act within contract, and contractor requests modifications of contract. Gov't declines to make requested modifications, and directs contractor to perform. Based on denial of modifications, contractor then says "That's it. This contract is at an end." Gov't sends appropriate notice of breach and opportunity to cure letters, finally terminates contractor for default, and determines damages.  Contractor appeals CO's determination of damages on many counts, one of which is that the gov't's termination for default was invalid because gov't breached first.  Anyone have some general case law citations holding that gov't's prior breach does not preclude it from terminating contract for contractor's breach?

By Dave Barnett on Thursday, October 11, 2001 - 02:12 pm:

Interesting...I don't have any case law at hand but how long a time elapsed from the gov't breach until the subsequent event (contractual trauma) occurred? If a short time, the contractor could claim forbearance; if a significant time, the gov't could claim the contractor waived his contractual rights vis a vis the gov't breach. I suspect forbearance is the case here.

That's one take, on the other hand, possibly the request for modifications was the contractor's assertion for consideration for the gov't breach. Accordingly the contracting officer should proceed with the contractor in resolving the matter via the CDA, requiring a proper claim, asserting a sum definite, yadda yadda...

With little knowledge of all the circumstances, as a KO I would first consider the gov't breach immaterial to the instant breach (based on KTr waiver of its contractual rights)in order to win the battle. Realistically, I think you're looking at a T4C in lieu of a T4D. If the contractor and the program are deemed important enough and to keep the good will between both parties, try to resolve under the CDA provided the KO reinstates the contract via a supplemantal agreement citing an improper T4D (you know, the old WHEREAS, the gov't improperly terminated contact Yadda Yadda and WHEREAS the contractor agrees to continue performance as established under contract Yadda Yadda, now THEREFORE contract Yadda Yadda is in effect and all rights and obligation thereunder assume to the respective parties, etc etc). No matter what, you need your agency counsel in on this one.

And if you reinstate, does this open the door for another claim for the period of suspension due to an improper termination action? If so, suggest a global settlement on all outstanding claims.

Bottom line, how hard do you want to fight this battle? And are you prepared to take the hits?

By Linda Koone on Thursday, October 11, 2001 - 02:33 pm:

Anonymous:

You may want to read Thomas & Sons, ASBCA 51874.

The Govt breach was settled via modification prior to the contractor breach,(although contractor claimed it wasn't), which may be different from your situation. However, it may point you in the direction of other relevant cases.

By Anonymous on Thursday, October 11, 2001 - 05:42 pm:

To Dave Barnett:
additional info, change mind? its a timber sale contract. gov't suspension due to injunction during env. suit re: consultation with FWS. During inj., agency refunded 85% downpayment as per contract. During inj. also, market for pulpwood component of the contract tanked. (contract had small am't of pulpwood, loss of market did not prevent performance of cut and remove x amt. pulpwood, nor did it make contract non-performable) after injunction lifted, gov't requested reinstatement of downpayment, contractor requested modification deleting sale of pulpwood. Deletion of requirement to cut and remove pulp not at all in gov't best interest, and less expensive to have company removing and selling sawtimber in exact same area remove the pulpwood at same time than trying to get someone to come in and remove it after.
After gov't says no, won't remove pulpwood component, and by the way, replace your downpayment, purch. says "that's it, I consider this contract at an end." Major amount of sawtimber not cut, gov't reappraises, resells, loses money, assesses damages in co decision, purch. appeals to Board of contract appeals.
during same time and in same contract in fed.claims court, judge just rules the gov't breached contract by not consulting in first place. purchaser now argues in front of Board of contract appeals that the gov't's breach resulting in suspension means gov't's termination for default is invalid. ???? more think?

to Linda Koone: thank you, I will check the case out!

By joel hoffman on Thursday, October 11, 2001 - 11:41 pm:

Anon, please explain what the breach was... I'm slow, sometimes. I don't believe a suspension of work, imposed by a court injunction, is a "breach." Of course, I'm not familiar with the specific terms of this contract, either. happy sails! joel hoffman

By Anonymous on Friday, October 12, 2001 - 06:29 pm:

Joel - you ask the key question - the agency didn't think the suspension of work imposed by a court injunction was a breach either, ESPECIALLY as the contract provided for the purchaser to agree to suspend if required to do so by a court of competent jurisdiction.
The injunction was ordered because the agency and FWS formally consulted on the LRMPs as amended, not on the original LRMPs,(since it and FWS had concluded that they did not adequately protect the owl,) and Dr. Robin Silver et al. argued that the decision in Pacific Rivers required consultation on the original LRMPs, as opposed to the amended ones. Despite the fact that formally consulting on the original plans was stupid since they were being amended, and thus would have no consequence, the judge bought the enviromentalists arguments for 17 months. (Within days after he was taken off the case (retired) the following judge dismissed the case.)
In our current case,Purchaser's attorney argued that even though the contract specifically said that the purchaser would agree to suspension of the sales in the event of an injunction, (and agreed to a limited type of damages), that the agency none-the-less breached the contract by "refusing" to formally consult with FWS on the original plans, thus putting them in the position where they could be sued, and the Claims Court judge agreed.
(The truly remarkable part of the whole story is that the consultation on the original plans (which by then were 3/4 of the way through amendment) did not result in any modifications to the contract -- BECAUSE THE CONTRACT HAD ALREADY BEEN MODIFIED TO MEET THE REQUIREMENTS OF THE AMENDMENTS TO THE PLANS!!!!!!!!!!!!!) (and, 3 years later, the Supreme Court agreed that the original LRMP's did not require consultation.)So the contract was suspended for 18 months for no value whatsoever, and now the agency has to pay the purchaser common-law damages for not doing something it shouldn't have had to do and for which the parties had already agreed on specific lesser damages!!!!!!!! Kafka could not have written it better. (you can tell this case really gets my goat!)

By joel hoffman on Friday, October 12, 2001 - 07:23 pm:

WOW! Happy Sails! joel

By Dave Barnett on Tuesday, October 16, 2001 - 01:46 pm:

Now we wouldn't think federal judges had personal axes to grind, would we. What a mess. The more I thought about it the more crazy ideas came into me head. If an executive contract is stayed (or suspended by the judiciary, does a contract exist since one of the key elements of the contract is "lawful purpose" and the judiciary deems the contract is not meeting that element (but is correctable hence a suspension rather than a null and void ruling)? Will the contractor get greedy and ask for unabsorbed overhead costs due to a delay caused by a governmental action? I can see why it gets your goat.

By Anonymous on Tuesday, October 16, 2001 - 02:42 pm:

Dave: a shiny penny for you!!! OF COURSE the contractor is asking for unabsorbed overhead -- the problem is that the contract only covered the cutting and removing of timber from federal lands, and the contractor wants all the lumber mill costs - even though the lumber mill activities were not at all part of the contract -- some operators mill their timber, some sell it to others, and in fact this operator did both! and the cherry inside the chocolate is the millions of dollars the contractor is requesting for this little-more-than mom,pop, and the inlaws lumber mill!

By Vern Edwards on Tuesday, October 16, 2001 - 04:08 pm:

Anonymous:

By any chance, was the case that produced the injunction Sierra Club v. Babbitt, 65 F.3d 1502? Was the timber cut to make way for a logging road?

By Anonymous on Tuesday, October 16, 2001 - 04:11 pm:

Vern -- no, it wasn't.

By Vern Edwards on Tuesday, October 16, 2001 - 04:20 pm:

Anonymous:

I don't think a court-ordered suspension is a breach of contract, but it may be a compensable delay. I haven't looked at the clauses in a timber sales contract in a while, so I don't remember what provision it made for such events.

Can you tell us the name and date of the Claims Court case that you mentioned on Oct 12--the one in which the judge agreed with the contractor's lawyer about the government breach?

By Anonymous on Tuesday, October 16, 2001 - 04:27 pm:

Vern - Precision Pine & Timber, Inc. v. U.S., Ct. Fed. Cl. No 98-720C, decision issued July 30, 2001, Judge Damich. are you gov't or private practicioner? (I am agency counsel, working through DOJ.)

By Vern Edwards on Tuesday, October 16, 2001 - 04:38 pm:

Anonymous:

I'm a private practitioner, and a layman.

By Anonymous on Tuesday, October 16, 2001 - 04:45 pm:

Vern -- p.s. I like your idea of not a breach but a compensable delay. We've already lost on a motion for reconsideration, and weren't planning appeal since the record and briefing didn't provide all info available, and am not sure how we would go about this argument. The purchaser wanted breach because then they were not constrained by the contract's enunciated damages. How are you thinking to argue compensable delay?

By Vern Edwards on Tuesday, October 16, 2001 - 06:25 pm:

Anonymous:

So what happened was that the Forest Service awarded a bunch of timber sales contracts, but got into a spat about the Endangered Species Act (ESA) with some environmentalists, who filed suit to block the timber sales. A U.S. district court issued an injunction that forced the Forest Service to suspend the timber sales, which it had the right to do under the terms of the timber sales contract. The suspension clause limited the remedies available to the purchaser in the event of such a suspension.

The "contractor" was one of the purchasers. It filed a suit for breach of contract, arguing that the Forest Service got into the spat with the environmentalists because it had acted unreasonably with regard to its duties under the ESA. It argued that by acting unreasonably with regard to its duties under the ESA--which resulted in the district court injunction which forced the suspension--the Forest Service breached its implied duty to cooperate with and not to hinder the purchaser, and thus the purchaser was entitled to breach damages.

The U.S. Court of Federal Claims (Judge Edward Damich) agreed with this argument, holding that the implied duty to cooperate and not to hinder included the duty to obey the law, i.e., the ESA, and thus avoid injunctions and consequent suspensions. The court also held that the suspensions were not sovereign acts. The result was that the court granted the purchaser's motion for summary judgment that the Forest Service had breached the contract, which means that the purchaser's recovery is not limited by the terms of the suspension clause.

Do I have it right?

The court's decision is about 50 pages long and includes 24 pages of information and arguments about the Endangered Species Act which I suspect most of us are in no position to analyze. Judge Damich has a law degree from Columbia University. He was appointed to the bench by President Clinton, but he was the Chief Intellectual Property Counsel for the Senate Judiciary Committee when Orrin Hatch was the chairman (1995-1998) and he was appointed to the Copyright Royalty Commission by the first President Bush. (Dave Barnett: What personal axe do you think Judge Damich had to grind? Do you know him? Do you know something about him that the rest of us don't?)

The court's decision makes sense to me, but what do I know? I don't know anything about the Forest Service's obligations under the ESA and I doubt that many others at this forum do either, but aside from that the decision seems pretty straightforward. Of course, the rest of us at this forum certainly don't have the information at our disposal that you have. (I assume that you are one of the USDA lawyers identified in the decision.)

With which of the court's holdings do you disagree? Do you disagree that the Forest Service acted unreasonably with regard to its duties under the ESA? Do you disagree that if the Forest Service acted unreasonably then it breached its duty to cooperate and not to hinder? Do you disagree with both?

What's the citation for the Supreme Court decision that you mentioned? How does it affect the decision of the Court of Federal Claims? What is the Forest Service going to do now?

By Vern Edwards on Tuesday, October 16, 2001 - 06:30 pm:

Anonymous:

My compensable delay idea was based on the belief that the suspension was not a breach of contract. Government purchase contracts include clauses that entitle the contractor to compensation short of breach damages in the event of a government-caused unreasonable delay. But now that I have read the court's decision I realize that my notion of compensable delay won't help you.

The plaintiff's lawyer must have presented a heck of a case.

Vern

By Dave Barnett on Wednesday, October 17, 2001 - 07:28 am:

Well Vern, I don't know the judge involved so my comment was rhetorical in nature. But do you really believe that all judges don't have biases/agendas? If that was the case then why are some impeached or denied a position on the bench by the Senate?

By Vern Edwards on Wednesday, October 17, 2001 - 09:06 am:

Dave:

I don't have any beliefs regarding "all" judges. I just wondered what axe you thought that the judge in Anonymous's case had to grind. I thought maybe you had personal knowledge of the case, since your rhetorical comment suggested that you felt Anonymous's agency had been wronged by the decision. Have you read the Precision Pine & Timber decision? Do you think that the Forest Service was wronged?

(Actually, in her/his Oct 12 6:29pm post, I think Anonymous referred to two judges--the district court judge in the Silver v. Babbitt case, who "bought" the environmentalists' arguments, and Judge Damich of the Court of Federal Claims, who made the Precision Pine & Timber, Inc. v. U.S. decision.)

I only joined this thread because I didn't understand what Anonymous was getting at and wanted to learn more. What I have learned by reading the Precision Pine & Timber decision has reinforced my belief that we should try to get all the facts before we jump to conclusions or offer solutions to problems not fully understood--a thing that I'm guilty of from time to time.

Vern

By Anonymous on Wednesday, October 17, 2001 - 02:58 pm:

Vern and Dave:
Vern your understanding of what happened is correct, but the confusion is this: the FS still maintains that it did not ignore its duty under the ESA. After the MSO was listed, the FS in Region 3 informally consulted with the FWS on the original LRMPs and regional timber sales, realized there was trouble, and then modified the timber sales and developed amendments to the original LRMPs so they would meet the requirements of the ESA as to the MSO., and the FS and FWS consulted on that. THE FS IN REGION 3 COMPLIED WITH ITS DUTIES UNDER THE ESA as to the MSO.
However, in a different FS region, the 9th Circuit decided the Pacific Rivers case, holding that the agency had to reconsult on all LRMPs each time a new species was listed. That's nice, but the fact patterns there and here were different. Seeing the handwriting on the wall during informal consultations after the MSO was listed, Region 3 immediately began amending the LRMPs and modifying its contracts to protect the owl, and consulted formally on those improvements instead.

THe environmentalists sued FS region 3 on the basis that the Pacific Rivers decision required formal consultation on the original LRMPs as a technical or procedural requirement, (even though in reality in Region 3 there was no benefit to formally consult on the originals given the amendments and modifications.) Judge Muecke agreed. It is interesting to note that FWS did not come up with any modifications to the contracts based on consultation under the old LRMPs -- cause the contracts had already been modified to meet the much more rigorous requirements in the LRMPs as amended.

The second point that the FS had been trying to make is that consultation should not be required on the LRMPs, which are just theory, and don't provide any information of what specifically will happen on the ground, but that the consultation should be held on the specific ations - timber sale contracts, etc., cause that is where you can determine actual facts regarding how many owls will be taken, how much of their habitat will be removed, etc.

FWS agreed with this -- without specific activities - cut trees in this location, skid trees in that location -- you cannot know what effects the sale will actually have on the animal or habitat, and in fact when ordered to consult on the original LRMPs, actully reviewed the timber contracts vis a vis the LRMPs so they could quantify actions.
The Supreme Court agreed that consultation is required on specific actions -- contracts, etc. and not on the LRMPs by themselves in Ohio Forestry Assn.; unfortunately that was several years after Judge Muecke ran rampant in Silver v. Thomas.
Unfortunately Judge Damich did not have the benefit of all the information regarding the agency's actions and position in Silver v. Babbit; if he had, I believe he would not have concluded that the FS breached its opportunity not to hinder. Hope that explains the problem better.