McLeod Group, LLC v. United States ( 2019 )

In the United States Court of Federal Claims
No. 18-628C
Filed: April 4, 2019
)
MCLEOD GROUP, LLC, )
)
Plaintiff, )
) Contract Disputes Act; Blanket Purchase
v. ) Agreement; Subject-Matter Jurisdiction;
) RCFC 12(b)(1); Breach of Contract.
THE UNITED STATES, )
)
Defendant. )
)
Richard P. Rector, Counsel of Record, Dawn E. Stern, Of Counsel, DLA Piper US LLP,
Washington, DC; Joshua B. Duvall, Matross Edwards, LLC, Washington, DC, for plaintiff.
Sonia W. Murphy, Trial Attorney, Patricia M. McCarthy, Assistant Director, Robert E.
Kirschman, Jr., Director, Joseph H. Hunt, Assistant Attorney General, Commercial Litigation
Branch, Civil Division, United States Department of Justice, Washington, DC; Charlene T.
Storino, Of Counsel, Christine R. Couvillon, Of Counsel, Acquisition and Procurement, United
States Department of Homeland Security, Washington, DC, for defendant.
MEMORANDUM OPINION AND ORDER
GRIGGSBY, Judge
I. INTRODUCTION
In this Contract Disputes Act (“CDA”) action, plaintiff, McLeod Group, LLC
(“McLeod”), alleges that the United States Department of Homeland Security (“DHS”) breached
its contractual obligations under a blanket purchase agreement (the “BPA”) and certain task
orders issued pursuant to the BPA. See generally Compl. As relief, McLeod seeks to recover
monetary damages and attorney’s fees and costs from the government. Id. at Prayer for Relief.
The government has moved to dismiss Counts I, II and V of the complaint for lack of subject-
matter jurisdiction, pursuant to Rule 12(b)(1) of the Rules of the United States Court of Federal
Claims (“RCFC”). See generally Def. Mot. For the reasons set forth below, the Court
GRANTS the government’s partial motion to dismiss and DISMISSES Counts I, II and V of the
complaint.
II. FACTUAL AND PROCEDURAL BACKGROUND 1
A. Factual Background
Plaintiff, McLeod, is a Maryland limited liability company and a service-disabled
veteran-owned small business headquartered in Columbia, MD. Compl. at ¶ 1. In this Contract
Disputes Act action, McLeod alleges that DHS breached its contractual obligations under the
BPA and subsequent task orders issued pursuant to that agreement. See generally Compl.
Specifically, McLeod alleges in Counts I, II and V of the complaint that DHS breached
the BPA by acting in bad faith and abusing its discretion in connection with the performance and
administration of the BPA. Id. at ¶¶ 80-99, 113-118. McLeod also alleges that the agency
breached its contractual obligations to collaborate and cooperate with McLeod on certain task
orders issued pursuant to the BPA. Id. at ¶¶ 100-112. In addition, McLeod alleges that DHS
unreasonably failed to pay the preparation expenses associated with the CDA claim that McLeod
filed with the DHS contracting officer. Id. at ¶¶ 119-123. And so, McLeod seeks to recover
monetary damages in the amount of $5,203,055.42, and attorney’s fees and costs from the
government. Id. at Prayer for Relief.
1. The OCAO Investigation
As background, in 2011, DHS commenced an internal human resources investigation into
the agency’s chief administrative officer and the management of the Office of the Chief
Administrative Officer (“OCAO”), after receiving complaints of a hostile work environment at
the OCAO. Id. at ¶¶ 21-22. On July 26, 2011, representatives of DHS requested that the
principal of McLeod, Mark Burns, cooperate with this investigation and that Mr. Burns provide
information about the management environment within the OCAO. Id. at ¶ 23; see also id. at ¶
2. In response, Mr. Burns informed DHS that the chief administrative officer at issue “created a
highly oppressive and toxic environment for OCAO staff.” Id. at ¶ 24.
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The facts recited in this Memorandum Opinion and Order are taken from the complaint (“Compl.”); the
government’s partial motion to dismiss (“Def. Mot.”); the Appendix attached thereto (“Def. App’x”); and
plaintiff’s response and opposition to the government’s partial motion to dismiss (“Pl. Resp.”). Except
where otherwise noted, all facts recited herein are undisputed.
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2. The Blanket Purchase Agreement
As a result of its internal human resources investigation, DHS decided to hire a
management-consulting firm “to provide DHS with agency-wide management consulting
services and to evaluate and provide recommendations on improvements to organizational
structure, mission, and organization of the agency’s core lines of business.” Id. at ¶ 18; see also
id. at ¶¶ 7-15. To that end, the agency conducted a competitive acquisition for the award of a
blanket purchase agreement that “would be used to support both OCAO and the entirety of
DHS” in January 2011. Id. at ¶¶ 16-17.
On September 29, 2011, DHS awarded the BPA to McLeod. Id. at ¶ 18. Thereafter,
DHS issued seven task orders to McLeod under the BPA, during the period September 30, 2011,
through September 11, 2014. Def. Mot. at 3-5; Def. App’x at 249-51.
The BPA calls for a performance period from September 30, 2011, through September
29, 2016, and a ceiling amount of $8,000,000.00. Def. App’x at 3. The BPA also provides that
the awardee under this agreement must “attend a post-award kickoff meeting” and complete
monthly status reports on open task orders. Id. at 13-14.
In addition, the BPA provides that the awardee may be required to develop and maintain
a project management plan and participate in in-progress reviews. Id. at 14. Lastly, and
specifically relevant to this dispute, the BPA states that the agreement “does not obligate any
funds” and that the agreement “is not a contract.” Id. at 5, 7.
In April 2012, the executive of another government contractor—Java Productions, Inc.
(“JPI”)—asked Mr. Burns whether JPI could work as a subcontractor under the BPA. Compl. at
¶ 33. McLeod alleges that, after Mr. Burns declined this request, DHS retaliated against McLeod
and declined to award McLeod any additional task orders pursuant to the BPA. 2 Id. at ¶¶ 33-40.
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On August 28, 2012, DHS awarded JPI an indefinite delivery indefinite quantity contract for services to
support the DHS Office of Operations Coordination with professional management support for the
Homeland Security Information Network. Def. App’x at 251-54. The agency issued multiple task orders
under that contract. Id.
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3. McLeod’s CDA Claim
On October 4, 2016, McLeod submitted a certified claim to the DHS contracting officer
alleging, among other things, that DHS failed to execute its contractual responsibilities under the
BPA in a good faith and trusted manner, and that the agency acted in bad faith by not issuing
additional within-scope task orders to McLeod. Def. App’x at 134, 149; see also 247-48. In the
final decision, the DHS contracting officer found that:
McLeod has failed to articulate a proper basis for its claim and the evidence
provided does not show that the Government acted in bad faith and failed to execute
contractual responsibilities in good faith. [The agency] did not at any time have
specific intent to injure McLeod. A BPA is an agreement and [the agency] could
have at any time stopped using the BPA or closed it due to lack of support by the
Program Office with whom the BPA was awarded.
Id. at 270. And so, the DHS contracting officer denied McLeod’s CDA claim in its entirety on
May 3, 2017. Id. at 247.
Thereafter, McLeod filed this action.
B. Procedural History
On May 2, 2018, McLeod filed the complaint. See generally Compl. On August 31,
2018, the government filed a motion to dismiss Counts I, II, and V of the complaint. See
generally Def. Mot. On October 29, 2018, McLeod filed a response and opposition to the
government’s partial motion to dismiss. See generally Pl. Resp. On November 21, 2018, the
government filed a reply in support of its partial motion to dismiss. See generally Def. Reply.
This matter having been fully briefed, the Court resolves the pending partial motion to
dismiss.
III. LEGAL STANDARDS
A. RCFC 12(b)(1)
When deciding a motion to dismiss upon the ground that the Court does not possess
subject-matter jurisdiction, pursuant to RCFC 12(b)(1), this Court must assume that all
undisputed facts alleged in the complaint are true and must draw all reasonable inferences in the
non-movant’s favor. Erickson v. Pardus, 551 U.S. 89, 94 (2007); RCFC 12(b)(1). But, plaintiff
bears the burden of establishing subject-matter jurisdiction, and it must do so by a preponderance
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of the evidence. Reynolds v. Army & Air Force Exch. Serv., 846 F.2d 746, 748 (Fed. Cir. 1988).
Should the Court determine that “it lacks jurisdiction over the subject matter, it must dismiss the
claim.” Matthews v. United States, 72 Fed. Cl. 274, 278 (2006).
In this regard, the United States Court of Federal Claims is a court of limited jurisdiction
and “possess[es] only that power authorized by Constitution and statute . . . .” Kokkonen v.
Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). The Tucker Act grants the Court
jurisdiction over:
[A]ny claim against the United States founded either upon the Constitution, or any
Act of Congress or any regulation of an executive department, or upon any express
or implied contract with the United States, or for liquidated or unliquidated
damages in cases not sounding in tort.
28 U.S.C. § 1491(a)(1). The Tucker Act is, however, “a jurisdictional statute; it does not create
any substantive right enforceable against the United States for money damages. . . . [T]he Act
merely confers jurisdiction upon [the United States Court of Federal Claims] whenever the
substantive right exists.” United States v. Testan, 424 U.S. 392, 398 (1976) (alterations original).
And so, to pursue a substantive right against the United States under the Tucker Act, a plaintiff
must identify and plead a money-mandating constitutional provision, statute, or regulation; an
express or implied contract with the United States; or an illegal exaction of money by the United
States. Cabral v. United States, 317 F. App’x 979, 981 (Fed. Cir. 2008) (citing Fisher v. United
States, 402 F.3d 1167, 1172 (Fed. Cir. 2005)); see also Martinez v. United States, 333 F.3d 1295,
1302 (Fed. Cir. 2003). “[A] statute or regulation is money-mandating for jurisdictional purposes
if it ‘can fairly be interpreted as mandating compensation for damages sustained as a result of the
breach of the duties [it] impose[s].’” Fisher, 402 F.3d at 1173 (quoting United States v. Mitchell,
463 U.S. 206, 217 (1983)).
B. The Contract Disputes Act
The Contract Disputes Act (“CDA”) waives sovereign immunity and expressly authorizes
this Court to review the final decisions of a contracting officer. 41 U.S.C. § 7104; Zhengxing v.
United States, 71 Fed. Cl. 732, 737 (2006), aff’d, 204 Fed. App’x 885, (2006); see also 28 U.S.C.
§ 1491(a)(2) (providing that this Court “shall have jurisdiction to render judgment upon any
claim by or against, or dispute with, a contractor arising under section 7104(b)(1) of title 41 [the
Contract Disputes Act], . . . on which a decision of the contracting officer has been issued under
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section 6 of that Act.”). This Court has held that its jurisdiction under the CDA requires the
existence of an express or implied contract with the government. Zhengxing, 71 Fed. Cl. at 737.
And so, the CDA applies only to express or implied contracts entered into by a federal executive
agency. 3 Id.; 41 U.S.C. § 7104.
The requirements for establishing the existence of an express or implied contract are
identical. See Night Vision Corp. v. United States, 469 F.3d 1369, 1375 (Fed. Cir. 2006);
Huntington Promotional & Supply, LLC v. United States, 114 Fed. Cl. 760, 767 (2014) (“The
elements are the same for an express or implied-in-fact contract. . . .”). A plaintiff must show:
(1) mutuality of intent; (2) consideration; (3) lack of ambiguity in the offer and acceptance; and
(4) actual authority to bind the government in contract on the part of the government official
whose conduct is relied upon. Kam-Almaz v. United States, 682 F.3d 1364, 1368 (Fed. Cir.
2012); see also Trauma Serv. Grp. v. United States, 104 F.3d 1321, 1325 (Fed. Cir. 1997). In
this regard, this Court has held that blanket purchase agreements are not contracts. Crewzers
Fire Crew Transport, Inc. v. United States, 98 Fed. Cl 71, 77 (2011), aff’d, 741 F.3d 1380 (Fed.
Cir. 2014). Rather, these agreements are “a simplified method of filling repetitive needs for
supplies or services by establishing ‘charge accounts’ with qualified sources of supply.”
Zhengxing, 71 Fed. Cl. at 738 (quoting 48 C.F.R. § 13.303-1(a)); see also Crewzers, 741 F.3d at
1382-83.
The Federal Circuit has also recognized that a blanket purchase agreement lacks the
mutuality of consideration required to be a contract, because a blanket purchase agreement is
“merely a framework for future contracts and only creates a contractual obligation with regard to
accepted orders.” Zhengxing v. United States, 204 Fed. App’x 885, 886-87 (Fed. Cir. 2006).
And so, the CDA does not confer jurisdiction upon the Court to consider claims based upon a
blanket purchase agreement. Zhengxing, 71 Fed. Cl. at 738-39.
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A plaintiff must also demonstrate compliance with the requirements of the CDA to establish jurisdiction
in a Contract Disputes Act matter. The CDA requires that all claims made by a contractor against the
government relating to a contract shall be in writing and shall be submitted to the contracting officer for a
final decision. 41 U.S.C. § 7103(a); Northrop Grumman Computing Sys., Inc. v. United States, 709 F.3d
1107, 1111-12 (Fed. Cir. 2013). If the claim made by the contractor is for more than $100,000.00, the
contractor must also certify the claim. 41 U.S.C. § 7103(b)(1).
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IV. LEGAL ANALYSIS
The government has moved to dismiss Counts I, II and V of the complaint for lack of
subject matter jurisdiction, because these claims rely solely upon the blanket purchase agreement
that McLeod entered into with DHS to establish a contractual relationship between the parties.
See generally Def. Mot. Specifically, the government argues that the Court does not possess
subject-matter jurisdiction to consider these claims for three reasons. First, the government
argues that there is no factual or legal predicate to establish jurisdiction under the CDA in this
case, because the subject BPA is not a contract. Id. at 8-10. The government also argues that
McLeod fails to assert non-frivolous allegations regarding the existence of a contract with the
government, because the allegations in the complaint related to the BPA “are directly foreclosed
by binding legal precedent holding that BPAs are not contracts.” Def. Reply at 5.
In addition, the government argues that McLeod fails to identify the specific terms of the
BPA that have allegedly been breached, and, thus, McLeod cannot meet the pleading
requirements under RCFC 9(k). Id. at 5-6; see also RCFC 9(k). And so, for these reasons, the
government requests that the Court dismiss Counts I, II, and V of the complaint pursuant to
RCFC 12(b)(1). Def. Mot. at 10.
In its response and opposition to the government’s partial motion to dismiss, McLeod
counters that the dismissal of its claims related to the BPA upon jurisdictional grounds would be
improper, because the question of whether the BPA is a contract is a question of law. Pl. Resp.
at 7-11. McLeod also argues that it has asserted non-frivolous allegations regarding the
existence of a contract with the government, because the allegations in the complaint “reflect a
fully formed and partially performed agreement” with the government. Id. at 12-13 (emphasis
removed). And so, McLeod requests that the Court deny the government’s partial motion to
dismiss. Pl. Resp. at 17.
For the reasons set forth below, a careful reading of the complaint and the BPA makes
clear that the Court does not possess subject-matter jurisdiction to consider the claims set forth in
Counts I, II and V of the complaint. And so, the Court GRANTS the government’s partial
motion to dismiss and DISMISSES Counts I, II and V of the complaint. RCFC 12(b)(1).
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A. The Court Does Not Possess Jurisdiction To
Consider CDA Claims Based Upon McLeod’s BPA
The government persuasively argues in its partial motion to dismiss that this Court does
not possess subject-matter jurisdiction to consider McLeod’s claims that DHS breached its
contractual obligations under a blanket purchase agreement. See generally Def. Mot. This Court
has held that, to establish jurisdiction under the CDA, a plaintiff must establish the existence of
an express or implied contract with the government. Zhengxing, 71 Fed. Cl. at 737. The Federal
Circuit has also held that blanket purchase agreements are not contracts with the government.
Crewzers Fire Crew Transport, Inc. v. United States, 741 F.3d 1380, 1382-83 (Fed. Cir. 2014);
see also Zhengxing, 204 Fed. App’x at 886-87. Rather, these agreements are “frameworks for
future contracts—‘a set of grounds rules as it were, and no obligations are assumed by either
party until orders are given by the Government and accepted by the contractor.’” Crewzers, 741
F.3d at 1381 (quoting Modern Sys. Tech. Corp. v. United States, 979 F.2d 200, 204 (Fed. Cir.
1992)). And so, the CDA does not confer jurisdiction upon the Court to consider claims based
upon the alleged breach of a blanket purchase agreement. Zhengxing, 71 Fed. Cl. at 738-39. 4
A careful review of the complaint and the BPA at issue in this dispute makes clear that
the BPA is not a contract that can be relied upon to establish jurisdiction in this case. First, the
plain text of the BPA provides that this agreement is “not a contract” with the government. Def.
App’x at 7. While, perhaps not fully dispositive, this language shows that the parties to the BPA
did not intend for this agreement to be a contract. See Tri-Star Electronics Int’l, Inc. v. Preci-
Dip Durtal SA, 619 F.3d 1364, 1367 (Fed. Cir. 2010) (“[T]he intention of the parties to a contract
controls its interpretation.” (citations omitted)).
Second, the BPA provides that this agreement “does not obligate any funds” and that
“Task Orders will be placed against this BPA by DHS” for particular services. Def. App’x at 5,
7. In this regard, the terms of the BPA are quite analogous to the BPA at issue in Zhengxing v.
United States, 204 Fed. App’x 885 (Fed. Cir. 2006), where the Federal Circuit recognized that
the language in a blanket purchase agreement providing that the “agency shall be obligated only
to the extent of authorized call orders actually placed under that agreement” showed that the
4
The government has included a copy of the BPA that McLeod entered into with DHS in the appendix to
its partial motion to dismiss. Def. App’x at 2-27; see also Pl. Resp. (indicating that plaintiff does not
dispute the terms of the BPA).
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blanket purchase agreement at issue in that case lacked the mutuality of consideration needed to
be a contract. Zhengxing, 204 Fed. Appx at 886-87 (explaining that a blanket purchase
agreement is “merely a framework for future contracts and only creates a contractual obligation
with regard to accepted orders.”)
The absence of mutuality of consideration in the BPA at issue here is further evidenced
by the fact that this agreement does not impose any significant obligations upon McLeod or
DHS. The BPA provides that all performance obligations will be specified in the task orders to
be issued pursuant to the BPA. See Def. App’x at 7-8; see also id. at 5 (“Delivery destination
and schedule will be specified in each individual Task Order”); id. at 9 (“Based upon issuance of
written Task Order(s) . . . Contractor shall be required to provide service on-site . . . .”). Notably,
the BPA also does not obligate DHS to issue any task orders. See generally id. 2-19. While
McLeod correctly observes that the BPA provides that McLeod “shall be required” to “attend a
post-award kickoff meeting” and to complete monthly status reports on open task orders, there
are no other duties or obligations imposed upon either party in the BPA. Id. at 13-14.
Indeed, the plain language of the BPA makes clear that this agreement is “a simplified
method of filling repetitive needs for supplies or services by establishing ‘charge accounts’ with
qualified sources of supply.” Zhengxing, 71 Fed. Cl. at 738 (quoting 48 C.F.R. § 13.303-1(a));
see also Crewzers, 741 F.3d at 1382-83. Because such an agreement is not a contract with the
government, McLeod cannot rely upon the BPA to establish jurisdiction in this case.
McLeod’s argument that the jurisdictional dismissal of its claims related to the BPA
would be improper is also misguided. Pl. Resp. at 7-11. It is well-established that McLeod bears
the burden of establishing subject-matter jurisdiction with respect to its breach of contract
claims. Reynolds v. Army & Air Force Exch. Serv., 846 F.2d 746, 748 (Fed. Cir. 1988). Should
McLeod fail to do so, the Court must dismiss these claims. Matthews v. United States, 72 Fed.
Cl. 274, 278 (2006).
In its response and opposition to the government’s partial motion to dismiss, McLeod
argues that it “strongly disagrees with the interpretation of the agreement advanced by [the
government] and can demonstrate that, when properly read, the agreement is a contract between
McLeod and the Government.” Pl. Resp. at 11. But, McLeod does not put forward a persuasive
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argument that the BPA at issue here materially differs from the blanket purchase agreements that
this Court and the Federal Circuit have held not to be a contract. See generally id.
McLeod argues that there is mutuality of consideration between the parties in this case,
because the BPA “placed multiple performance obligations on McLeod with regard to the BPA
that were independent of its obligations under the Task Orders.” Id. at 16. But, as discussed
above, the BPA only requires that McLeod “attend a post-award kickoff meeting” and complete
monthly status reports on any open task orders. McLeod identifies no other “performance
obligations” imposed by the BPA in its response. 5 Def. App’x at 13-14; see generally Pl. Resp.
McLeod’s contention that the “issuance and performance of seven Task Orders is
particularly compelling evidence of [the existence] a contract” is also not persuasive. Pl. Resp.
at 13. There is no dispute in this case that the task orders issued pursuant to the BPA are
contractual agreements with the government. Def. Mot. at 3 (“DHS issued seven task orders to
McLeod under the BPA . . . .”); Pl. Resp. at 12 (“DHS issued seven Task Orders under the
[BPA] . . . .”). But, McLeod has simply not met its burden to establish that the BPA itself is a
contract. Given this, the Court cannot consider McLeod’s breach of contract claims related to
the BPA. 6
V. CONCLUSION
In sum, McLeod has not shown that the Court possesses subject-matter jurisdiction to
consider Counts I, II and V of the complaint. And so, for the foregoing reasons, the Court:
1. GRANTS the government’s partial motion to dismiss; and
2. DISMISSES Counts I, II and V of the complaint.
5
McLeod’s argument that this Court may consider Counts I, II and V of the complaint under the Federal
Circuit’s holding in Engage Learning, Inc. v. Salazar, 660 F.3d 1346 (Fed. Cir. 2011), is also misplaced.
Pl. Resp. at 7-11. In that case, the Federal Circuit held that “plaintiff need only allege the existence of a
contract . . . ‘relative to’ an express or implied contract with an executive agency to establish subject-
matter jurisdiction.” Engage Learning, 660 F.3d at 1353. But, the Federal Circuit has also specifically
held in Crewzers Fire Crew Transport, Inc. v. United States, that a blanket purchase agreement is not a
contract for purposes of establishing jurisdiction under the Tucker Act. Crewzers, 741 F.3d at 1384-85.
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Because the Court determines that the BPA at issue in this case is not a contract—and, as a result, the
Court does not possess subject-matter jurisdiction to consider McLeod’s CDA claims related to that
agreement—the Court does not reach the other issues raised in the government’s partial motion to
dismiss.
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The government shall FILE an answer or response to the remaining counts of the
complaint on or before May 20, 2019.
IT IS SO ORDERED.
s/ Lydia Kay Griggsby
LYDIA KAY GRIGGSBY
Judge
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