Fluor Federal Solutions, LLC v. PAE Applied Technologies, LLC ( 2018 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 17-1468
FLUOR FEDERAL SOLUTIONS, LLC,
Plaintiff - Appellant,
v.
PAE APPLIED TECHNOLOGIES, LLC,
Defendant - Appellee.
Appeal from the United States District Court for the Eastern District of Virginia, at
Alexandria. Anthony John Trenga, District Judge. (1:16-cv-00215-AJT-JFA)
Argued: March 21, 2018 Decided: April 12, 2018
Before WILKINSON, MOTZ, and KING, Circuit Judges.
Affirmed by unpublished per curiam opinion.
ARGUED: Benjamin L. Hatch, MCGUIREWOODS LLP, Norfolk, Virginia, for
Appellant. Mark William Mosier, COVINGTON & BURLING, LLP, Washington, D.C.,
for Appellee. ON BRIEF: Scott P. Fitzsimmons, Eric Lieberman, WATT, TIEDER,
HOFFAR & FITZGERALD, LLP, McLean, Virginia; Ronald L. Fouse, Washington,
D.C., E. Rebecca Gantt, MCGUIREWOODS LLP, Norfolk, Virginia for Appellant.
Daniel E. Johnson, Bryan M. Byrd, COVINGTON & BURLING LLP, Washington,
D.C., for Appellee.
Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:
More than a dozen years after Fluor Federal Solutions, LLC entered into a contract
with PAE Applied Technologies, LLC, Fluor brought this action, alleging that PAE
breached that contract. Following a three-day bench trial, the district court entered
judgment for PAE. Fluor appeals, and for the reasons that follow, we affirm.
I.
In 2000, the predecessor companies of Fluor and PAE initiated discussions
regarding a bid that PAE was preparing to submit to an Air Force contract. To make its
bid competitive, PAE requested that Fluor and other subcontractors cap the rate of their
General and Administrative (“G&A”) costs to 2.3% of direct costs. PAE contends that,
after some discussion, Fluor agreed to do so; Fluor asserts that it never did agree to the
2.3% cap. It is undisputed that PAE submitted its final proposal to the Air Force, using
the reduced 2.3% rate, and won the Air Force contract.
In October 2002, Fluor began billing PAE for work completed under its
Subcontract with PAE. The Subcontract between Fluor and PAE required Fluor to
submit invoices every two weeks and PAE to pay them within 30 days. During the first
year of the Subcontract, Fluor, without dispute, submitted invoices for G&A costs with
the 2.3% cap, and PAE paid G&A costs at that rate.
Beginning in January 2004, Fluor submitted invoices with G&A costs exceeding
the 2.3% cap. PAE rejected the increased rate and continued to pay Fluor the amount due
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under the 2.3% G&A rate. Intermittently over the years, Fluor complained about the
2.3% cap, but PAE continued to pay pursuant to the 2.3% cap.
In March 2016, nearly 12 years after PAE initially paid Fluor pursuant to the 2.3%
cap, Fluor filed this action alleging that PAE breached the Subcontract by refusing to pay
Fluor’s actual G&A costs. Both PAE and Fluor moved for summary judgment, which the
district court denied. Following a three-day bench trial, the court found that the
Subcontract was ambiguous and, relying on parol evidence, concluded that Fluor and
PAE had agreed to a 2.3% G&A cap. The district court ruled against Fluor on all counts
and entered judgment for PAE.
On appeal, Fluor argues that the district court erred in holding the contract
ambiguous and concluding on the basis of parol evidence that the parties agreed to
impose a 2.3% cap on Fluor’s G&A costs. PAE maintains that the court correctly
concluded that the contract was ambiguous and properly relied on parol evidence, and
additionally contends that the applicable five-year statute of limitations bars Fluor’s
claim. Because we conclude that limitations do indeed bar Fluor’s claim, we do not
reach the contract interpretation arguments.
II.
A.
Under Virginia law (which the parties agree applies in this diversity case), an
action for breach of contract must be brought within five years after the cause of action
accrues. Va. Code Ann. § 8.01-246(2). The limitation period begins to run “when the
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breach of contract occurs.” Id. § 8.01-230. PAE argues that this statute of limitations
bars Fluor’s claim because the claim accrued in 2004 when the alleged breach — PAE’s
capping of Fluor’s G&A costs — occurred.
In cases like this in which an alleged breach spans an extended period of time,
courts have distinguished between acts that constitute a “single contin[uous] breach” and
those that constitute a “series of separate breaches.” Am. Physical Therapy Ass’n v.
Fed’n of State Bds. of Physical Therapy, 628 S.E.2d 928, 929 (Va. 2006). A single
continuous breach occurs when “the wrongful act is of a permanent nature” and
“produces all the damage which can ever result from it.” Hampton Rds. Sanitation Dist.
v. McDonnell, 360 S.E.2d 841, 843 (Va. 1987) (citation and internal quotation marks
omitted). Conversely, when wrongful acts “occur only at intervals, each occurrence
inflicts a new injury and gives rise to a new and separate cause of action.” Id. (emphasis
added).
If the alleged breach is a “single continuous breach,” the limitations period runs
from the inception of that breach, even when the breach continues for years. Westminster
Investing Corp. v. Lamps Unlimited, Inc., 379 S.E.2d 316, 318 (Va. 1989) (rejecting
contention that “a new cause of action” occurred every day defendant breached contract
during seven year period). Thus, the Westminster court held that failure to enforce a
uniform business hours provision, required by the parties’ lease, constituted a single
continuous breach that accrued on the first day of the alleged breach despite the fact that
the conduct continued for years. Id. The subsequent failures to enforce the business
hours provision did not constitute new individual breaches because it was the initial
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wrongful conduct — failure to enforce business hours — that produced the plaintiff’s
harm. Id.; see also Hunter v. Custom Bus. Graphics, 635 F. Supp. 2d 420, 422–23 (E.D.
Va. 2009) (explaining that an employer’s payment over an 11-year period to his
employee of a fixed commission rate lower than the higher rate set forth in the
employment agreement constituted a single continuous breach).
By contrast, in American Physical Therapy, the court held that a breach of contract
claim was not a continuous breach where the defendant from time-to-time during a seven
year period increased licensure fees. 628 S.E.2d at 929–30. The crucial term in the
contract stated that the defendant “shall establish prices for the Examination”
periodically. Id. at 929. The court therefore explained that a distinct obligation arose
each time the defendant periodically imposed a new fee. Id. at 930. Moreover, because
each fee increase was determined based on the prior fee, the imposition of a new fee also
beget a new injury, thereby creating separate, distinct breaches of contract. Id.
Given this precedent, we can only conclude that Fluor asserts a “single continuous
breach” of the Subcontract by PAE. Fluor alleges in its complaint that from the outset,
“PAE wrongfully refused to pay Fluor more than 2.3% for Fluor’s G&A cost incurred on
the project” and continued through the entire Subcontract to refuse to pay any amount in
G&A costs “above the artificial 2.3% cap.” J.A. 15, 17. See Reply Br. of Appellant at 25
(“[I]n 2004 . . . PAE first refused to pay Fluor its actual G&A costs.”). In other words,
Fluor alleges that PAE initially breached and continued to breach the contract in exactly
the same manner for the next dozen years. It is undisputed that PAE first rejected Fluor’s
invoices requesting payment of G&A costs at a rate higher than 2.3% in January 2004.
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J.A. 328–29; J.A. 687–88. Thus, if PAE breached the contract, it did so in a single
continuous breach running from when PAE began to reject Fluor’s invoices in 2004.
Unlike American Physical Therapy, where each additional fee increase inflicted a
new injury, PAE’s imposition of a 2.3% cap on Fluor’s G&A costs did not give rise to a
new or distinct injury: Fluor’s entire harm flowed directly from PAE’s initial decision to
cap G&A costs. That Fluor’s alleged damages increased over the course of the contract
does not alter the fact that the breach was single and continuous. Virginia law makes
clear that “the running of the statute is not postponed by the fact that the actual or
substantial damages do not occur until a later date.” Caudill v. Wise Rambler, Inc., 168
S.E.2d 257, 260 (Va. 1969); see also Van Dam v. Gay, 699 S.E.2d 480, 482 (Va. 2010)
(“[I]t is immaterial that all the damages resulting from the injury do not occur at the time
of the injury.”).
Fluor’s suit, filed twelve years after this breach accrued, clearly falls outside the
governing five-year statute of limitations. Accordingly, limitations bar its claim. *
B.
*
Fluor makes the meritless suggestion that we cannot render a decision on
limitations grounds “[i]n the absence of appropriate findings of fact and conclusions of
law from the district court.” Reply Br. of Appellant at 24. Virginia law makes clear that
if a resolution of a statute of limitations defense rests on undisputed facts, it may be
applied as a matter of law. Hensel Phelps Constr. Co. v. Thompson Masonry Contractor,
Inc., 791 S.E.2d 734, 737 (Va. 2016) (explaining that because the statute of limitations
defense was “based on undisputed facts and the applicable contracts and statutes,” the
court reviews the lower court decision de novo). Our holding rests entirely on undisputed
facts, i.e., beginning in 2004 Fluor submitted biweekly invoices of its actual G&A costs,
PAE refused to pay Fluor’s G&A costs above the 2.3% cap, and this alleged harm
continued for the duration of the contract.
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In resisting the limitations bar, Fluor offers two unpersuasive arguments.
First, relying on a government regulation, Federal Acquisition Regulation
(“FAR”) § 52.216-7, which was incorporated into the Subcontract, Fluor contends that its
claim did not accrue until 2015 when the Government completed its audit of the
Subcontract thereby establishing Fluor’s “final rates.” Reply Br. of Appellant at 25; 48
C.F.R. § 52.216-7(e). That argument ignores the fact that this very same regulation
requires the contractor (here, PAE) to pay the subcontractor (here, Fluor) the
subcontractor’s “anticipated final rates” in accordance with the terms of the contract. 48
C.F.R. § 52.216-7(e)(1). Of course, the parties here disagree as to the terms of the
contract and the “anticipated final costs”: PAE maintains Fluor agreed to a 2.3% cap on
its final G&A costs; Fluor contends it did not. But that does not change the fact that if
PAE breached the terms of the contract, it did so beginning in 2004 when PAE refused to
pay any G&A costs exceeding the 2.3% cap. As Fluor itself acknowledges, its “invoices
were continuously rejected by [PAE] unless and until they were recalculated and billed
with a G&A rate of 2.3%.” J.A. 689. Therefore, if there was a breach, it accrued when
PAE first refused to pay the anticipated final rates, not when the Government completed
its audit years later.
Fluor’s second argument relies on an exception to the limitations bar. The
Supreme Court of Virginia has cautioned courts to construe all limitations exceptions
narrowly and “[w]here there exists any doubt, it should be resolved in favor of the
operation of the statute of limitations.” Burns v. Bd. of Supervisors of Stafford Cty., 315
S.E.2d 856, 859 (Va. 1984). Nonetheless, Fluor maintains that, assuming that the breach
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occurred in 2004, limitations do not bar its claim because the Subcontract is “indivisible.”
Reply Br. of Appellant at 26. Under an indivisible contract, a party may pursue a remedy
immediately upon the breach or wait until the “time fixed by the contract for full and
final performance.” Heirs of Roberts v. Coal Processing Corp., 369 S.E.2d 188, 190 (Va.
1988). However, when a contract provides for “payment in installments, due at specified
times,” this exception does not apply. Id. The Subcontract expressly provides for
“payment in installments”: Fluor submitted invoices on a biweekly basis, and PAE paid
them within 30 days of receipt. J.A. 621. Thus, the exception for indivisible contracts
clearly does not apply.
III.
For the foregoing reasons, the judgment of the district court is
AFFIRMED.
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