Freedom Systems, LLC ( 2015 )

ARMED SERVICES BOARD OF CONTRACT APPEALS
Appeal of -- )
)
Freedom Systems, LLC ) ASBCA No. 59259
)
Under Contract No. W912C6-12-C-0005 )
APPEARANCE FOR THE APPELLANT: Mr. Reginald B. McFadden
President & CEO
APPEARANCE FOR THE GOVERNMENT: Raymond M. Saunders, Esq.
Army Chief Trial Attorney
CPT Ahsan M. Nasar, JA
Trial Attorney
OPINION BY ADMINISTRATIVE JUDGE THRASHER ON THE
GOVERNMENT'S MOTION FOR SUMMARY JUDGMENT
Appellant, Freedom Systems, LLC (Freedom), appealed a contracting officer's
final decision (COFD) denying appellant's sponsored claim of its subcontractor
Wyndham Hotel Management, Inc. (Wyndham), in the amount of $820,800.00 in
cancellation fees. The government asserts Wyndham provided appellant and the
government a written release fully releasing appellant from any claims Wyndham
might pursue against appellant related to the contract. Therefore appellant's appeal is
barred by the Severin doctrine, entitling the government to a judgment as a matter of
law. Freedom opposes the motion. We grant the government's motion.
STATEMENT OF FACTS (SOF) FOR PURPOSES OF THE MOTION
1. On 10 November 2011, the Army Reserve Contracting Center - Fort Jackson,
South Carolina (government), awarded Contract No. W912C6-12-C-0005 to Freedom to
provide support services for eight Yell ow Ribbon Reintegration Programs (Events)
scheduled to occur between 18 November 2011 and 16 September 2012 (R4, tab 1 at 1,
13 ). The Yellow Ribbon Events are Congressionally mandated programs that assist
National Guard and Reserve Soldiers and their families in transitioning back to civilian
life from a military deployment (mot. ii 2).
2. On 5 December 2011, Freedom entered into a Hotel Group Event Agreement
with Wyndham (R4, tab 7 at 12). The agreement included a cancellation clause permitting
Freedom to cancel a scheduled event upon providing notice to Wyndham prior to the
scheduled event and payment of $136,800.00 per each canceled event (id. at 8).
3. The government held the contracted events in Orlando, Florida, from
November 2011 to September 2012 (R4, tab 1 at 13; app. resp. to answer ii 16). On
9 January 2012, the contracting officer (CO) informed Freedom of numerous
complaints received regarding the poor quality of services offered at the Wyndham
Orlando Resort during the December 2011 event and asked Freedom to propose a new
hotel for the remaining events (R4, tab 9). Thereafter, on 23 January 2012, the
contract administrator informed Freedom that the customer had decided to reschedule
the February 2012 event to 27-29 April 2012 and had "decided on the Rosen for all
trips" (R4, tab 14 at 1).
4. By email, on 25 January 2012, appellant confirmed that it was able to accommodate
the change in venue and the new date (R4, tab 16 at 1).
5. Freedom completed performance of the remaining events by 30 September
2012 (app. resp. to answer ii 16).
6. On 31July2013, appellant submitted a claim in the amount of$820,800.00
stating:
[T]his claim [is] for payment of subcontract
cancellation damages to Wyndham pursuant to the
"Cancellation Policy" provision of the committed
subcontracts executed in the performance of the prime
contract W912C6-12-C-0005.
Freedom Systems, LLC is the interested party filing the
claim. Freedom Systems, LLC is the prime company
supporting execution of the subject contract.
(R4, tab 22 at 2)
7 .. On 11 September 2013, the CO informed Freedom that its claim was not
properly certified as required for claims over $100,000.00 (R4, tab 24 at 1). Freedom
resubmitted its claim with accompanying certification on 11 September 2013 (R4,
tab 25 at 3).
8. The CO issued a COFD denying Freedom's claim on 21 January 2014 (R4,
tab 26). Freedom timely appealed the COFD to the Board on 11 April 2014 (R4,
tab 27 at 1).
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9. Freedom filed its complaint on 8 May 2014 asserting the basis for its appeal,
as follows:
10. Government breached the contract when
Appellant was directed to change venue by the
Government despite our contractual obligation with the
Wyndham. The Government was fully aware of these
obligations but directed a change of venue despite such
knowledge or necessity for a contract change to
implement. At no time did the Appellant agree to release
the Government from any and all liability under the
contract for further equitable adjustments attributable to
this change. Given that no contract modification was
executed, Appellant was still under obligation to utilize
the Wyndham in execution of the contract and had no
standing to mitigate any subcontract damages with
Wyndham. Conversely, Appellant can find no contractual
requirement or obligation to notify Wyndham for
mitigation of damages to reduce the claim as implied by
the Government.
11. Given that there was no termination,
Appellant is not seeking liquidated damages resulting
from termination of the contract as referred to by the
government. Appellant is however seeking claims and
equitable adjustments under FAR 52.212-4, Paragraph d.
Disputes, for damages resulting from the breach of contract
per item 9.
12. Given that there was no termination, the
Appellant asserts that it complied with all contract terms
and conditions, and provided the Government, upon
request, with adequate assurances of future performance.
Where deficiencies were cited by the Government,
Appellant provided satisfactory corrective actions and
remedies.
13. On September 11, 2013, Appellant submitted a
certified claim and request for a contracting officer's
final decision in the amount of $820,800.00. Appellant
has and will submit documentation from Wyndham
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compelling the Appellant to pay these amounts upon
request by the Government or the Board pursuant to
ASBCA Rule 14 or Rule 15 requests or actions.
(Compl. ilil 10-13)
10. On 14 July 2014, Freedom provided the government a copy of a letter
dated 1March2012 that Freedom represented it had received from Wyndham's
outside counsel. The letter asserted a claim of $820,800.00 against Freedom and
threatened suit should Freedom fail to pay. Freedom also informed the government
that Wyndham delayed filing a suit against appellant pending the outcome of its claim
against the government. (App. resp. to answer il 22)
11. Ms. Jennifer E. Constantinou, Vice President-Legal of Wyndham,
executed a general release to Freedom on 21 April 2015 releasing any and all claims
against Freedom related to Freedom's claim against the government, as follows:
Wyndham Hotel Management, Inc., its agents,
officers, parent corporations, employees, directors,
servants, shareholders, representatives, predecessors,
successors, heirs, executors, administrators and all other
persons, firms, corporations, subsidiaries, affiliates,
associations, partnerships, and the predecessors, successors
and assigns of any of them (collectively, "Wyndham"),
hereby fully and forever releases and discharges Freedom
Systems, LLC ("Freedom") of and from any and all claims,
actions, causes of action, demands, rights, costs, loss of
service, expenses and compensation whatsoever, which
the undersigned now has/have or which may hereafter
accrue on account of or in any way growing out of
Freedom's contract with the U.S. Army, Contract
No. W912C6-12-C-0005 (or any contract related thereto)
which form the basis for Freedom's appeal to the Armed
Services Board of Contract Appeals ("ASBCA"),
docketed as ASBCA No. 59259. Wyndham remises,
releases, and discharges Freedom and Freedom's officers,
agents, and employees, of and from all civil liabilities,
obligations, claims, appeals, and demands which
Wyndham has or may have, whether known or unknown,
administrative or judicial, legal or equitable, including
attorney's fees, arising under or in any way related to
Contract No. W912C6-12-C-0005 or the disputes which
form the basis of ASBCA No. 59259.
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The undersigned further declare(s) and represent(s)
that no promise, inducement or agreement not herein
expressed has been made to the undersigned, and that the
terms of this Release are contractual and not a mere recital.
This Release and any party that succeeds to the
rights and responsibilities of a party, such as predecessors,
successors and assigns shall be bound by the terms and
conditions of this Release.
This Release constitutes the entire understanding
and agreement of Wyndham respecting the resolution of
this action. This Release may not be changed or modified.
The undersigned represents that she has the
authority to bind Wyndham.
(Mot., ex. G-1)
DECISION
Summary judgment is appropriate when there is no genuine issue of material
fact and the moving party is entitled to judgment as a matter of law. Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). When considering a motion for
summary judgment, the Board's function is not to weigh the evidence and determine
the truth of the matter but to determine whether there is a genuine issue for trial. Id.
at 249. The moving party bears the burden of establishing the absence of any genuine
issue of material fact and all significant doubt over factual issues must be resolved in
favor of the party opposing summary judgment. However, the party opposing
summary judgment must show an evidentiary conflict on the record; mere denials or
conclusory statements are not sufficient. Mingus Constructors, Inc. v. United States,
812 F.2d 1387, 1390-91 (Fed. Cir. 1987).
The government contends Wyndham's 21April2015 general release provides
the government with sufficient basis to invoke the Severin doctrine entitling the
government to judgment as a matter of law (gov't mot. at 3). The Severin doctrine,
which is taken from Severin v. United States, 99 Ct. Cl. 435 (1943), cert. denied, 322
U.S. 733 (1944), is based upon the principles of sovereign immunity and privity of
contract. It generally precludes a prime contractor from sponsoring a subcontractor
claim against the government if the prime contractor is not liable to the subcontractor
for the costs or damages in question. Severin, 99 Ct. Cl. at 442-44. Later precedent
has narrowed the Severin doctrine clarifying that the doctrine is narrowly construed
and the government bears the burden of showing the Severin doctrine applies. E.R.
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Mitchell Construction Co. v. Danzig, 175 F.3d 1369, 1371 (Fed. Cir. 1999). As
applied to releases, the government must show an unconditional iron-clad release that
clearly protects the contractor from any and all liability to the subcontractor for the
conduct in question. MA. Mortenson Co., ASBCA No. 53761, 06-1BCAii33,180
at 164,439 (government must establish an iron-clad release); E.R. Mitchell, 175 F.3d
at 1371; WG. Yates & Sons Construction Co. v. Caldera, 192 F.3d 987, 990-92 (Fed.
Cir. 1999) (allowing prime contractor sponsorship in instances where the prime
contractor is only conditionally liable to the subcontractor for whatever it can recover
from the government).
Appellant asserts three reasons why the Severin doctrine does not apply to the
facts of this appeal. First, appellant argues, "Neither the Government nor Wyndham
have provided guarantees or proof of any iron clad release sufficiency.... Because
there is no validation of the release, Appellant asserts it (the Prime) remains liable to
the subcontractor on the claim based upon the subcontract provisions provided as
material facts under the appeal." (App. opp'n at 3) We disagree. Wyndham has
provided appellant with an iron-clad general release that clearly protects appellant
from any and all liability to Wyndham for appellant's conduct regarding the contract.
Specifically, Wyndham's release "fully and forever" releases appellant from any all
claims, causes of action, or variations that Wyndham currently has or may later have
against appellant pertaining to appellant's contract with the government or this
contract appeal. Wyndham's release is on behalf of its agents and subsidiaries to
include the Wyndham Orlando Resort. Additionally, Wyndham's release is not
conditional nor does it have limited time applicability. Wyndham's release applies to
appellant, its agents, and its officers acting in an official capacity for appellant.
Wyndham's release also clarifies that it did not receive consideration from either the
government or appellant for granting its release against appellant. Furthermore,
Wyndham's release indicates that it received no inducement to provide this release to
appellant. Wyndham's release also binds its successor and is applicable to appellant
and its successors. (SOF ii 11) The release was also executed by an officer of
Wyndham with authority to bind the company (id.). Consequently, appellant can rely
upon this release as an unconditional iron-clad shield from further liability to
Wyndham related to the contract or the underlying issues of this claim.
Second, appellant asserts the Severin doctrine does not bar its appeal because
appellant's claim is not based upon its liability to its subcontractor but rather based
upon a government breach of contract with the prime which caused the prime to incur
damages from one of its subcontractors. The damages occurred when the government
changed the event locations and dates but never memorialized the changes by
modifying the contract. (App. opp'n at 4) The record before us on the motion
establishes appellant's claim is, in fact, appellant's sponsorship of Wyndham's claim.
Appellant's argument contradicts the only asserted rationale for its claim which was its
liability to Wyndham under the subcontract agreement cancellation policy clause
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(SOF iI 6). In addition, the only stated basis for its claim articulated in its complaint is
its liability to Wyndham for cancellation of the events (SOF iI 9). Additionally, the
only damages appellant's claim asserts against the government are for the exact
amount that Wyndham would claim against appellant under the terms of their
subcontract agreement (SOF iI 10). Appellant has not presented any evidence
indicating an independent prime contractor claim and the record on the motion before
us is devoid of any such evidence.
And finally, appellant argues the Severin doctrine does not apply because of the
government's wrongful failure to issue contract modifications for the changes in venue
and time of events constituted a constructive contract termination of the subcontract
under the termination clause, stating:
Although Appellant's claim does not expressly seek
recovery on a "constructive convenience termination"
basis, Appellant may advance a legal theory on appeal
that was not expressly raised in the claim if it relates to
the same set of operative facts as the claim, which is the
case here, J & J Maintenance, Inc., ASBCA No. 50984,
00-1 BCA iI 30,784. Appellant['s] claim and resulting
appeal establishes that the Government constructively
terminated the prime and supporting contracts by its
breach. Appellant's liability to Wyndham could be
established under the Termination for Convenience clause
in the subcontract. Under such circumstances the
Severin doctrine clearly does not apply.
(App. opp'n at 5) To the extent appellant is arguing the government's actions
constructively terminated the prime contract, the facts in the record on this motion
contradict appellant's argument. Appellant completed all contracted events and there
is no evidence in the record on the motion before us supporting a constructive
termination of the prime contract (SOF iI 5). Additionally, appellant's complaint
contradicts this argument; appellant twice in its complaint stated there was no
termination (SOF iI 9). To the extent appellant is arguing the government's actions
constructively terminated Wyndham's subcontract, appellant has been released from
any and all liability to Wyndham for the government's actions by the general release
(SOF iI 11).
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CONCLUSION
We conclude appellant's sole claim is a subcontractor pass-through claim on
behalf of its subcontractor Wyndham, based upon its liability to its subcontractor as a
result of government actions. Because appellant's subcontractor, Wyndham, has fully
and unconditionally released appellant from any and all claims related to this contract,
we conclude appellant's claim is barred by the Severin doctrine. As a result, this
release falls within the Severin doctrine barring this appeal as a matter of law. The
government's motion for summary judgment is granted.
Dated: 3 September 2015
dministrative Judge
Armed Services Board
of Contract Appeals
I concur I concur
//1~ at-------~-~,.___--_ _
MARK N. STEMPLER"' RICHARD SHACKLEFORD
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. 59259, Appeal of Freedom
Systems, LLC, rendered in conformance with the Board's Charter.
Dated:
JEFFREY D. GARDIN
Recorder, Armed Services
Board of Contract Appeals
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