Hallym Furniture Industrial Co., Ltd. ( 2021 )

ARMED SERVICES BOARD OF CONTRACT APPEALS
Appeal of - )
)
Hallym Furniture Industrial Co., Ltd. ) ASBCA No. 62782)
Under Contract No. W91QVN-20-A-0012 )
OPINION BY ADMINISTRATIVE JUDGE SMITH
ON RESPONDENT’S MOTION TO DISMISS
Appellant, Hallym Furniture Industrial Co., Ltd. (Hallym), appeals a
contracting officer’s final decision (COFD) that denied Hallym’s certified claim
seeking reinstatement of its Blanket Purchase Agreement (BPA) with Respondent,
Department of the Army 411th Contracting Support Brigade, Korea (the government).
Alternatively, Hallym’s claim sought an equitable adjustment for three different types
of costs arising from the cancellation of the BPA in the total amount of 169,500,000
Korean won (approximately $151,287.95).1 The government has moved to dismiss the
appeal, arguing that the BPA is not a valid contract as required by the Contract
Disputes Act (CDA), therefore the Board lacks subject matter jurisdiction over
Hallym’s appeal. Hallym argues that the BPA is a contract because Hallym could not
refuse a call order once it was issued. On balance, we find that this BPA is similar in
nature to other BPAs that the Court of Appeals for the Federal Circuit has held to be
non-contractual, thus we dismiss the appeal for lack of jurisdiction.
STATEMENT OF FACTS FOR PURPOSES OF THE MOTION
On April 6, 2020, the parties executed BPA No. W91QVN-20-A-0012 for
repair of Government-owned wooden furniture. (R4, tab 1) The BPA indicates that
the BPA “is not a contract” (id. at 5 2), but the BPA contains contrary descriptive
verbiage as well. 3 The BPA provided that individual repairs or groups of repairs
1 The symbol for Korean won is “₩” so Hallym’s total claim amount is shown as
“₩169.5M.”
2 Paragraph 2 of the Performance Work Statement reads: “TERM OF BPA: This BPA
is not a contract. If the contractor fails to perform in a manner satisfactory or
no longer required by the government, this BPA may be cancelled with 30 days
written notice to the contractor by the Contracting Officer (KO).” (R4, tab 1
at 5)
3 For example, and most notably, “Type of Contract. The government contemplates
award of a Fixed Unit Price, Multiple BPA’s contract resulting from this
solicitation.” (R4, tab 1 at 21) (emphasis omitted). Also, “[t]he Contractor
would be separately issued as “purchases” or “calls” or “call orders.” 4 (Id. at 8) The
BPA provided that call orders would be issued on a rotating basis between Hallym and
other awardee contractor(s). (Id. at 8) The BPA did not commit the government to
issue any call orders. Instead, paragraph 13 of the Performance Work Statement
provides that the government’s obligation arises only from call orders actually made
under the BPA: “EXTENT OF OBLIGATION: The Government is obligated under
this BPA only to the extent of authorized purchases [i.e. call orders] actually made
under the BPA.” (Id. at 8) The BPA indicates that “[t]he Government may require
continued performance of any services within the limits and at the rates specified in
the contract” (id. at 21).
After award of the BPA, the Government issued ten call orders that were
performed by Hallym. (R4, tab 10 at 5, 7; gov’t reply at 4 (“appellant . . . performed
all of the ordered repair work.”)) Disagreements arose, however, with regard to the
prices used by Hallym in its invoices, which were higher than in Hallym’s BPA price
proposal. (R4, tabs 13, 17-18, 23-27) To correct what it perceived to be defects in
Hallym’s invoices, the government itself generated the final invoice for Hallym’s work
(R4, tab 21; app. supp. R4, tab 4), but there is no evidence that the final invoice has
been paid. ((gov’t. reply br. at 5) (Appellant has not signed or acknowledged the final
invoice)).
Based upon the government’s opinion regarding Hallym’s “unsatisfactory
performance” relating to the invoices, the contracting officer notified Hallym on
September 21, 2020, that the BPA would be cancelled in 30 days because “[Hallym]
failed to perform this BPA services (sic) in a manner satisfactory to the Government.”
(R4, tab 20) 5 A written dialogue ensued where Hallym attempted to persuade the
contracting officer to retract the cancellation notice. (R4, tabs 22-27) The dialogue
shall maintain own facility (minimum of 198m2 [60 Pyeong]) to perform this
contract requirements (sic) for the entire contract period.” (Id. at 8) Also,
“[t]he Government may require continued performance of any services within
the limits and at the rates specified in the contract.” (Id. at 21) A word search
of the BPA finds 45 uses of the word “contract,” many of which are incidental
like “Section I -- Contract Clauses” (id. at 14), but approximately 10 of which
are not i.e. the clauses cited above. A document that the government intends
not to be a contract should minimize use of the word “contract.” Instead,
“BPA” should be used to describe the agreement.
4 The BPA uses all three terms to refer to the repair orders issued under the BPA. For
purposes of this decision, we use the term “call orders.”
5 The BPA provides that “[i]f the contractor fails to perform in a manner satisfactory
or no longer required by the Government, this BPA may be cancelled with
30 days written notice to the contractor by the Contracting Officer.” (R4, tab 1
at 5)
2
devolved into allegations by both parties of “lack of business integrity and ethical
business practices” (the government’s allegation against Hallym, (R4, tab 24 at 2; see
also gov’t. reply br. at 2)) and a “gross administrative error” and improper or illegal
changes to government documents (Hallym’s allegations against the government).
(Complaint at 6; see R4, tab 25)
When the government refused to withdraw the cancellation notice, instead
finalizing the cancellation on November 11, 2020, (R4, tab 27), Hallym submitted a
certified claim on November 25, 2020, seeking reinstatement of the BPA or, in the
alternative, ₩169.5M for bid preparation costs, facility lease costs, and lost future
profits – but not for payment of the government-generated invoice. (R4, tab 28) The
government denied Hallym’s claim in full with a COFD issued on December 7, 2020.
(R4, tab 29) The COFD addressed each of Hallym’s claim allegations regarding the
BPA bid, award, price, invoice process, and claimed financial injuries as well as the
government’s basis for canceling the BPA. Id. This appeal timely followed the COFD.
DECISION
I. Standard of Review
We review the government’s motion to dismiss for lack of jurisdiction pursuant
to the standards of FED. R. CIV. P..12(b)(1). L-3 Commc’ns Integrated Sys., L.P.,
ASBCA Nos. 60713, 60716, 17-1 BCA ¶ 36,865 at 179,624 (applying Rule 12(b)(1)
because Board may look to Federal Rules of Civil Procedure for guidance where
Board’s rules are silent). When a motion to dismiss pursuant to FED. R. CIV. P.
12(b)(1) denies or controverts allegations of jurisdiction, only uncontroverted factual
allegations are accepted as true for purposes of the motion, and other facts underlying
the jurisdictional allegations are subject to fact-finding based on the Board’s review of
the record. Cedars-Sinai Med. Ctr. v. Watkins, 11 F.3d 1573, 1583-84 (Fed. Cir.
1993); CCIE & Co., ASBCA Nos. 58355, 59008, 14-1 BCA ¶ 35,700 at 174,816.
The government’s motion distinguishes between a facial attack on the Board’s
jurisdiction and a factual attack, and the different standards that apply to our review of
factual allegations (gov’t. reply br. at 2-3). Though this digression is not incorrect, it
is unnecessary because the government’s motion to dismiss essentially relies upon no
facts at all save for the BPA itself and, perhaps, the written content of Hallym’s
certified claim. Hallym, as the proponent of the Board’s jurisdiction, bears the burden
of proving the Board’s subject matter jurisdiction by a preponderance of the evidence,
which includes showing the existence of a valid contract. See 41 U.S.C. § 7105(e)(2);
General Mills, Inc. v. United States, 957 F.3d 1275, 1284 (Fed. Cir. 2020); Reynolds v.
Army & Air Force Exch. Serv., 846 F.2d 746, 748 (Fed. Cir. 1988); United Healthcare
Partners, Inc., ASBCA No. 58123, 13 BCA ¶35,277 at 173,156. See also Crewzers
Fire Crew Transp., Inc. v. United States, 741 F.3d 1380, 1382 (Fed. Cir. 2014).
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II. BPAs are Generally not Contracts, and the BPA Here is no Exception
Fundamental contract law dictates that there can be no contract without mutual
obligations between the parties. See Kam-Almaz v. United States, 682 F.3d 1364, 1368
(Fed. Cir. 2012); Night Vision Corp. v. United States, 469 F.3d 1369, 1375 (Fed. Cir.
2006). Specifically, the Court of Appeals for the Federal Circuit has held that BPAs
that do not impose binding obligations upon the parties are not contracts. Crewzers,
741 F.3d at 1384; Modern Sys. Tech. Corp. v. United States, 979 F.2d 200, 206 (Fed.
Cir. 1992) (“absence of mutuality of obligation leads to the conclusion that the parties
lacked the requisite contractual intent”); see also See Ridge Runner Forestry v.
Veneman, 287 F.3d 1058 (Fed. Cir. 2002).6 In particular, where the government is not
obligated to place call orders, as here, the BPA “reflect[s] illusory promises that do not
impose obligations on either party.” Crewzers, 741 F.3d at 1382–83.
The government’s reliance upon Crewzers and Modern Sys. Tech. is apt, albeit
with a caveat. Despite the clause stating that “[t]his BPA is not a contract” here, the
parties do not address the fact that the BPA also contains numerous clauses, discussed
above, that refer to the document as a “contract.” (See, e.g. R4, tab 1 at 21 (Type of
Contract)) While the internal contradictions in the BPA here, and the government’s
failure to address them, present a slightly different factual predicate than that found in
Crewzers and Modern Sys. Tech., 7 the government’s motion goes beyond the
conclusory self-characterization in the BPA and demonstrates that the nature of the
BPA itself is, in fact, non-contractual. For example, as in Crewzers and Modern Sys.
Tech, Hallym’s BPA did not require either party to take action until a call order was
placed and accepted, supplying the consideration and mutual obligations missing from
the BPA to create a contractual relationship between the parties. Thus, Hallym’s BPA
is “a set of ground rules as it were, and no obligations are assumed by either party until
orders are given by the Government and accepted by the contractor.” Modern Sys
Tech., 979 F.2d 200 at 204. On that key question, Crewzers and Modern Sys. Tech.
are on point and we hold that the BPA here lacks mutual obligations and therefore is
not a binding contract.
6 The government also cites to McLeod Grp. v. United States, 840 F. App’x 525 (Fed.
Cir. 2020), an unpublished Federal Circuit decision, and Zhengxing v. United
States, 204 F. App’x 885 (Fed. Cir. 2006), which is “not citable as precedent.”
Rather than rely upon unpublished and non-precedential decisions, we instead
refer primarily to Crewzers and Modern Sys. Tech., which are valid and binding
precedent and, except as noted below, on point with this appeal.
7 Our review of Crewzers, Modern Sys. Tech., McLeod and Zhengxing found no
indication of similar internal contradictions in those BPAs.
4
The government’s hypotheticals at pages 12-13 of its reply brief, that the Board
would not possess jurisdiction if the Government had simply stopped issuing call
orders to Hallym instead of canceling the BPA, or if the Government had cancelled the
BPA for a reason unrelated to Hallym’s contract performance, or without stating a
reason at all, is persuasive and further illustrates the non-obligatory, therefore non-
contractual nature of the BPA. By plain reading of the provision that permits the
cancelation of the BPA upon 30 days notice, the government had the prerogative to do
exactly what it did here – cancel the BPA for any reason or none at all, and certainly
when the government became dissatisfied with Hallym’s performance related to its
invoices.
Hallym attempts to distinguish its BPA from those found not to be contracts by
arguing that Hallym could not refuse call orders once they were issued by the
government, a so-called obligation not found in Crewzers that, Hallym argues, makes
the BPA a valid contract (app. br. at 7-14). Even if true, that still does not provide
sufficient contract consideration or a mutual obligation that makes the BPA a contract
where the government is under no obligation to issue any call orders. See Modern
Sys., 979 F.2d at 204 (citing Gavin, Gov’t Requirements Contracts, 5 PUB. CONT. L. J.
243, 246 (1972)) (“Usually the parties merely arrange to do business when the
government places an order at the unit price named in the [BPA]. In such an
agreement, there is nothing in writing which requires the government to take any
ascertainable quantity or amount”). And we do not agree with Hallym’s contract
interpretation anyway. The BPA here provided that the government’s obligations were
created upon issuance of call orders (R4, tab 1 at 8), which must apply equally to
Hallym – the parties’ mutual obligations do not arise until the government initiates a
call order that is accepted by Hallym. Modern Sys. Tech., 979 F.2d at 204. The BPA
here did not contain an express provision where Hallym would only perform call
orders that it was “willing and able” to perform, as existed in Crewzers, 741 F.3d
at 1381. It also did not explicitly provide that “[e]ach order that the [government]
places and the contractor accepts becomes an individual contract,” as in Modern Sys.
Tech., 979 F.2d at 204 (emphasis added). But these clauses are little more than helpful
statements of the obvious – each call order cannot become a contract until there is an
offer and acceptance. As a result, the lack of a similar clause does not transform
Hallym’s BPA into a contract.
III. The Board’s Jurisdiction is Limited to Call Order Claims, but None are
Presented Here
As discussed above, although Hallym and the government were parties to ten
call orders, each of which was undisputedly a contract within the purview of the
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CDA, 8 the BPA itself is not a contract and, contrary to Hallym’s argument at page 14
of its opposition, Hallym’s claim does not allege injury or costs related to the
performance of Hallym’s ten call orders. (R4, tab 28) As the government noted in its
Answer at 57, Hallym may have some right to submit a call order claim if it suffered
recoverable damages during call order performance (including, it appears, to seek
payment upon the final invoice), but such claims were not made in Hallym’s certified
claim, were not addressed in the COFD, and we have no authority to adjudicate them
in this appeal.
CONCLUSION
The government’s motion is GRANTED and the appeal is DISMISSED for
lack of jurisdiction.
Dated: September 2, 2021
BRIAN S. SMITH
Administrative Judge
Armed Services Board
of Contract Appeals
(Signatures continued)
8 The government’s motion acknowledges that the call orders issued to Hallym were
CDA contracts. (See, e.g., gov’t. reply br. at 9 (Upon the placement of a call
order under a BPA, the call would become the contract, which then adopts the
terms of the BPA; as a matter of law, for purposes of Contract Disputes Act
jurisdiction; thus making ‘any interpretation required of the terms of the BPA . .
. an interpretation of the terms of [the call orders placed under the BPA] since
those orders were the vehicles that formed the contracts.)) (quoting Hewlett-
Packard Co., ASBCA Nos. 57940, 57941, 13 BCA ¶ 35,366 at 173,548).
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I concur I concur
RICHARD SHACKLEFORD J. REID PROUTY
Administrative Judge Administrative Judge
Acting Chairman Vice Chairman
Armed Services Board Armed Services Board
of Contract Appeals of Contract Appeals
I certify that the foregoing is a true copy of the Opinion and Decision of the
Armed Services Board of Contract Appeals in ASBCA No. 62782, Appeal of Hallym
Furniture Industrial Co., Ltd., rendered in conformance with the Board’s Charter.
Dated: September 2, 2021
PAULLA K. GATES-LEWIS
Recorder, Armed Services
Board of Contract Appeals
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