ANHAM FZCO, LLC

ARMED SERVICES BOARD OF CONTRACT APPEALS
Appeal of -- )
)
ANHAM FZCO, LLC ) ASBCA No. 59283)
Under Contract No. SPM300-10-D-3373 )
APPEARANCE FOR THE APPELLANT: Eric J. Marcotte, Esq.
Vedder Price P.C.
Washington, DC
APPEARANCES FOR THE GOVERNMENT: Daniel K. Poling, Esq.
DLA Chief Trial Attorney
John F. Basiak Jr., Esq.
Keith J. Feigenbaum, Esq.
Theodore E. Lorenz, Esq.
Trial Attorneys
DLA Troop Support
Philadelphia, PA
DECISION BY ADMINISTRATIVE JUDGE KINNER ON THE
GOVERNMENT'S MOTION FOR SUMMARY JUDGMENT
The government moves for summary judgment to deny the appeal of ANHAM
FZCO, LLC. The motion was filed 8 February 2017. Appellant filed its opposition
17 March and the government replied 17 April. For the reasons stated below we deny
the government's motion for summary judgment.
STATEMENT OF FACTS FOR PURPOSES OF THE GOVERNMENT'S
MOTION FOR SUMMARY JUDGMENT
On 14 April 2010, ANHAM FZCO, LLC (ANHAM) was awarded an
indefinite-quantity contract to procure, store and distribute food and non-food items to the
military and other federal customers in Kuwait, Iraq and Jordan (R4, tab 1 at 47, tab 27 at 1).
The contract was awarded and administered by the Defense Supply Center Philadelphia
(DSCP), now called the Defense Logistics Agency - Troop Support (DLATS) (R4, tab 27).
In the contract ANHAM assumed the role of Prime Vendor responsible for management of
the food inventory. Management of the inventory included a requirement to maintain a
45-day supply ready for distribution to federal customers. ANHAM was also responsible for
forecasting the monthly demand from the troops in the war zone. Although the government
is only required to order the specified minimum quantity in an indefinite-quantity contract,
the federal customers surpassed that amount in this contract. (R4, tab 1 at 47-48)
The contract required food to be purchased in the United States. Once it reached
the Middle East, ANHAM stored food in warehouses in Kuwait. To maintain
appropriate inventory levels, ANHAM needed to maintain a flow of food to the Kuwait
warehouses from American suppliers. This was accomplished through an extended
"pipeline" beginning with trucks transporting food to warehouses in the United States,
then to ports. Ships transported the food to Kuwait and trucks brought the food to
ANHAM's warehouses before distribution by truck to troops in Iraq. (R4, tab 14 at 12)
During the solicitation process potential offerors were concerned with the
possible withdrawal of American troops from Iraq. The President had made many
public statements about his intention to withdraw troops (e.g. app. opp'n, ex. C). If the
contract was terminated prematurely it was possible that the contractor would not
recoup the significant costs that would be incurred (app. opp'n, ex. A if 11, ex. B
at 275). The attendees at the 14 May 2008 pre-proposal conference expressed these
concerns. Amendment No. 0003 added the transcript of bidder questions from the
conference to the solicitation. Question number 12 in the conference asked:
The White House administration will change after the
November elections, and this solicitation is "all at risk".
What steps will DSCP take to mitigate PV losses if troops
are withdrawn? Will this loss mitigation include repayment
for facilities constructed in anticipation of contract award?
Will it cover PV products stocked in support of this massive
requirement? This will amount to hundreds of millions of
dollars.
Ans.: 1) Draw down period; 2) No, this contract has a
guaranteed minimum and that is all that the
Government is required to order and pay for under the
contract; 3) Again, draw down period will exhaust
pipeline product[.]
(R4, tab 3 at 20) Question number 124 at the conference asked:
Page 34: Notification to extend contract 3 days? What are
we supposed to do with our buildings, personnel assets and
on the water pipeline of supplies if 3 days prior to the 1st
option periods or any period we are terminated?
Ans.: DSCP will provide notice of intent 60 days prior to
the expiration of a performance period. This does not
guarantee that the government will exercise the option.
With regard to buildings, personnel assets and on the
water pipeline of supplies, the government provides a
contract minimum and the contractor assumes the risk.
2
We anticipate that a ramp down period will mitigate
risk.
(Id. at 33) Question number 134 at the conference asked:
Page 70: If the Democratic candidate wins the election in
November 2008 and they pull the troops out of the Middle
East-what happens to our assets, warehouse, personnel and
products in house and in the pipeline? 1 percent
guaranteed?
Ans.: There are too many assumptions here. If a troop
pull-out were to occur, DSCP would develop a ramp
down/exit strategy. The minimum contract value
remains at 1 °/o.
(Id. at 35) The amendment stated that the "[t]he answers in Section II are provided for
clarification purposes only and do not change the requirements in the solicitation"
(id. at 2).
Shortly after receiving award of the contract, ANHAM entered a service
agreement with Jassim Al Wazzan Sons General Trading Co., W.L.L. (Wazzan) for
lease of a warehouse in Kuwait, known as the Logistica warehouse (app. opp'n, ex. A;
R4, tabs 25, 72). That agreement had a term of 18 months with a 6-month extension
provision. The initial term of the agreement would expire 31December2011 (app.
opp'n at 9, ii 18).
In November 2008, during the final year of President Bush's term, the United States
entered a Status of Forces Agreement (SOFA) with Iraq. The SOFA was effective as of
1 January 2009. It established that American troops would leave the country by
31 December 2011. The SOFA caused DLATS to amend the solicitation on 29 May 2009
to reduce the term of the contract. Amendment No. 0018 to the solicitation changed the
base period of the contract to 18 months and established 4 one-year options. (R4, tab 14)
Notwithstanding the existing SOFA, it was not until 21 October 2011 that President Obama
finalized the decision that no United States troops would remain in Iraq in 2012 (gov't mot.
at 11, ii 40).
Before the withdrawal decision was finalized, ANHAM became concerned about
the impending drawdown of troops (app. opp'n, ex. A; R4, tab 54). But in June 2011,
DLATS encouraged ANHAM to plan to feed at Thanksgiving and Christmas the same
number of troops it fed earlier in the year (am. compI. ii 24). Later, in September,
ANHAM proposed to reduce its available warehouse assets or have the government pay
for the storage space. DLATS did not support ANHAM's proposed reduction. Instead,
DLATS advised ANHAM that it had to maintain its resources for full performance of
the contract. Contrary to that advice, food orders dropped significantly in October and
3
drastically fell in November and December. (Id. iii! 28-29) The government does not
challenge ANHAM's allegations that DLA encouraged planning for significant troop
levels in the final months of 2011.
United States troops were completely withdrawn from Iraq by 18 December 2011.
ANHAM had shipments of food in its pipeline at that time. ANHAM had also renewed
the lease for its largest warehouse in Kuwait until 30 June 2013 (am. compl. if 31).
ANHAM submitted a claim on 28 August 2013 to the DLATS contracting officer for
$10,989,020 which it allegedly incurred for lease of the warehouse between 1 January
2012 and 15 January 2013 (am. compl. if 39). DLATS denied the claim. ANHAM filed
its complaint 23 July 2015. DLA TS filed its answer to the complaint 20 May 2016.
The answer asserted six affirmative defenses (answer at 34, iii! 1-22). First,
DLATS alleges that the claim is barred by the Sovereign Acts Doctrine because it
characterizes ANHAM's claim as seeking costs resulting from the government's
decisions concerning military troop movements or classification of such information.
Second, DLATS asserts the claim is barred by the Political Question Doctrine because
the claim concerns wartime decisions by the President. Third, DLATS argues
appellant's claim should be dismissed because it assumed the risk that events in an
active war zone could increase its costs. Fourth, DLATS asserts that ANHAM waived
its right to pursue this claim because it renewed the lease that caused its increased costs.
Fifth, DLATS claims ANHAM's claim is barred because it failed to mitigate its
damages. Sixth, DLATS alleges that the representation in ANHAM's proposal that the
warehouse was leased for the duration of the contract was inaccurate which it asserts is
a material breach by ANHAM that excuses it from liability.
DECISION
A. Standard ofReview for Summary Judgment
We look to Rule 56 of the Federal Rules of Civil Procedure for guidance in
deciding motions for summary judgment. Board Rule 7(c)(2). It is settled law that
summary judgment will be granted where ( 1) the material facts are undisputed and
(2) the moving party is entitled to judgment as a matter oflaw. The moving party has
the burden of demonstrating both elements. IMS Tech., Inc. v. Haas Automation, Inc.,
206 F.3d 1422, 1429 (Fed. Cir. 2000). Here the government has failed to establish its
entitlement to summary judgment on either element.
B. Disputes of Material Facts Preclude Summary Judgment
The government asserts in its motion that it is entitled to summary judgment
because there are no disputed issues of material fact. It relies upon a recitation of facts
that are similar to the facts alleged in ANHAM's complaint. (Gov't mot. at 2-12) But
the government's statement of facts differs significantly from appellant's allegations
4
because it does not address ANHAM's allegations that DLATS actively misled the
contractor regarding the impending departure of United States Armed Forces from Iraq.
Specifically, ANHAM alleges in its complaint that DLATS insisted throughout 2011
that it possessed no information concerning plans for the withdrawal of American troops
from Iraq. ANHAM claims such representations by DLATS were untruthful because
the government had established a military departure date in an operational order issued
6 January 2011, OPORD 11-01 (app. opp'n at 10, ~ 22). That order directed the
removal of troops from Iraq in 2011. ANHAM also claims that DLATS was aware the
operational order was amended in May 2011 to narrow the period in which troops
would be withdrawn to 14 October to 18 December 2011 (app. opp'n at 11, ~ 25).
ANHAM alleges DLATS withheld that information and instead informed ANHAM that
plans had not been established for a drawdown of troops (id. at 11-12, `` 26-27).
ANHAM further alleges that DLA TS knowingly encouraged it to use incorrect troop
estimates when planning for food stocks through 2011 (id. at 12-13, `` 29-30, at 15-16,
`` 36-40, at 18, ~ 42, at 21, ~ 48).
As required, ANHAM's opposition does not merely rely upon its complaint. The
party opposing summary judgment cannot rest upon allegations in its pleadings, but must
respond by affidavits or otherwise, setting forth specific facts to show the existence of a
genuine issue for trial. Adamation, Inc., ASBCA No. 22495, 80-1BCA~14,385.
ANHAM's allegations are supported by documents in the Rule 4 file (e.g. R4,
tabs 48-72), documents submitted with its opposition (app. opp'n, exs. B-F, H-J) and the
affidavit of Beau Lendman, the senior vice president of the company (app. opp'n, ex. A).
These allegations identify disputed material facts that preclude summary judgment.
Notwithstanding these disputed facts DLATS requests summary judgment. The
gravamen of ANHAM' s claim is that the government was aware that it was
withdrawing its personnel from Iraq by the end of 2011, but kept this knowledge from
ANHAM, thus violating its contractual duty of good faith and fair dealing. DLATS
asserts that ANHAM's claim should be denied for three reasons. First it assumed the
risk that troops could be withdrawn. Second, it suffered no damages. Third its claim is
barred by the Sovereign Acts Doctrine. According, to the government the Board may
consider these arguments and disregard ANHAM's allegations ofDLATS'
misrepresentations discussed above. DLA TS asserts ANHAM' s allegations should be
ignored because the operational order was classified and troop level estimates are
irrelevant. More specifically, DLATS argues that its actual knowledge of how many
troops ANHAM had to be prepared to feed is irrelevant. According to DLATS, its
actions are irrelevant because ANHAM renewed the warehouse lease which is the
subject of its claim three months before the President's final agreement regarding a
continuing presence of United States troops in Iraq. DLATS also asserts troop
projections are irrelevant because ANHAM was already aware of the SOFA which
precluded troops remaining in Iraq past 31 December 2011 and Amendment No. 0018
of the solicitation had reduced contract requirements in response to the SOFA.
5
The government does not specifically address allegations that DLATS personnel
knowingly misrepresented information about the planned withdrawal and purposefully
encouraged ANHAM to rely upon false troop estimates. DLATS does not attempt to
justify withholding information from the contractor. Nor does it justify its statements
misleading the contractor about the plan to withdraw troops in 2011. The government,
instead, unsuccessfully attempts to evade the point of ANHAM's claim.
DLATS cannot ignore the obvious relevance of information it possessed
regarding the number of troops in Iraq, classified or not. Depriving the contractor of
access to that information would undermine ANHAM's ability to perform the contract.
It was ANHAM's responsibility to formulate an estimate of the number of people to be
fed every month. It based its food inventory on these estimates. IfDLATS advised use
of inflated estimates it could cause ANHAM to project higher demand, causing
increased costs in procurement, shipping and storage. This is precisely ANHAM' s
claim-that DLATS' s misrepresentations caused it to extend the warehouse lease.
DLATS' direction that ordering had to be based on current
troop strength, rather than projections, would also impede
moving to a smaller warehouse. Thus, ANHAM had no
choice but to exercise an extension of the Logistica
warehouse lease.
(Am. compl. ~ 31)
ANHAM further alleges that the operational order had established a specific plan
to leave Iraq by the middle of December (am. compl. `` 8-9). To the extent that
DLATS's representations to ANHAM during performance conflict with the existence,
or the contents, of OPORD 11-1 it is relevant and material to ANHAM's claim. If
DLATS urged ANHAM to use false troop projections, either in conflict with OPORD
11-1, or to support it, those facts are material and relevant. The parties' dispute
concerning DLATS access to the plan to withdraw troops in December 2011 prevents
consideration of summary judgment.
The government's description of the SOFA as the public plan for troop withdrawal
is a similarly disputed material fact. The SOFA did not establish a definitive plan upon
which ANHAM could base troop projections. DLATS's actions in 2011 demonstrate
ANHAM could not rely upon the SOFA. ANHAM learned that the SOFA was
meaningless for planning purposes from DLATS's insistence there was no plan for troop
withdrawal. ANHAM claims it was consistently informed by DLATS in 2011 that there
was no established plan for troop withdrawal from Iraq (am. compl. `` 20, 23-24, 26, 29,
31 ). DLATS again confirms this in its reply. In 2017 DLATS still argues that "a decision
by President Obama to withdraw troops from Iraq was not made until mid-October 2011"
(gov't reply at 8). DLATS also asserts that during 2011 ANHAM knew "the United
States might withdraw all troops from Iraq by December 2011, and might not" (id. at 9).
6
Contrary to the fact statement in the government's motion, the SOFA did not provide
ANHAM knowledge to counteract misrepresentations by DLATS.
The government argues alternatively that ANHAM's claim seeks the same costs it
recovered through regular contract payments. It claims ANHAM was paid the cost of
the warehouse as part of the contract's normal distribution price (gov't reply at 2). But
the government produced no proof of such payments or how the payments covered costs
for warehousing excess inventory. DLATS does not explain how payments ANHAM
received during contract performance for procurement and distribution of food would
also account for the storage cost of excess food beyond the amounts necessary during
performance. This is especially unclear in light of the government's separate
reimbursement to ANHAM after the contract for the cost of the excess inventory
accumulated in the final months of 2011 as well as the cost of destruction of that
inventory (id.).
Rather than support summary judgment, these arguments establish that the facts
material to ANHAM's claim are in dispute. As the party opposing a motion for summary
judgment, ANHAM is to be given the benefit of all reasonable doubt in determining
whether a genuine factual issue exists. Adamation, 80-1BCA~14,385. ANHAM
controverts the central premise of the government's motion. DLATS's motion primarily
rests upon an allegation that ANHAM assumed the risk that troops might leave while it
had food stored in its warehouse. The government supports that argument with
ANHAM' s proposal in which it describes and accepts the risk of a major withdrawal of
troops (gov't mot. at 21-26). But the government's determination to remove troops from
Iraq is not the premise of ANHAM's claim. ANHAM claims that its assumption of risk in
this contract did not include assuming the risk of government misinformation. Assuming
ANHAM's allegations to be true for the purposes of the government's motion, the
contractor had no basis to assume that DLATS's representations regarding troop
withdrawal were false. ANHAM could reasonably assume that the government, as its
contracting partner, would not purposely mislead it. ANHAM was responsible for
formulating monthly projections of the number of federal personnel it would feed.
Information regarding troop disposition was a critical component of such estimates.
Misrepresentations by DLATS of facts pertaining to government plans to withdraw troops
from Iraq would undermine ANHAM's ability to form reliable projections of federal
personnel to be fed in coming months. Thus, ANHAM alleges it relied upon the
misinformation provided by the government. Its allegations can be fairly read to also
assert that the government intended the contractor to rely upon the false troop projections
provided by DLATS.
It is likely that ANHAM relied upon DLATS's misinformation because it
contradicted available public information. DLATS's allegations regarding the
President's desires to withdraw troops from Iraq, and even that he entered the SOFA
promising to do so, do not deflect ANHAM's allegations. ANHAM has provided
evidence that, in discussions concerning troop levels DLATS showed complete
7
disregard for the SOFA. Contrary to that agreement, DLATS urged ANHAM to plan
for 80,000 troops in November. Contrary to the agreement, DLATS advised ANHAM
to prepare for the same level of personnel late in 2011 as it had been serving earlier in
the year. DLATS confirms this in its motion. DLATS asserts that there was widely
held public knowledge that the United States and Iraq "were in high-level discussions to
possibly keep some troops in Iraq beyond December 2011" (gov't mot. at 10, ii 36). It
argues that, up to the final agreement with Iraq, the President was negotiating whether
troops would remain in Iraq in 2012 (gov't reply at 8). Thus, the SOFA was
disregarded by DLATS and the President was allegedly working contrary to its terms.
In that environment, the public information available to ANHAM regarding the
President's intentions was little more than talk.
DLATS further argues that ANHAM's reliance upon the statements made by
DLATS and recorded in Amendment No. 0003 of the solicitation is misplaced (gov't
reply at I). DLATS asserts the information in Amendment No. 0003 is irrelevant
because the amendment stated it was for clarification only and did not change the
requirements of the solicitation. The statements in Amendment No. 0003 are also
allegedly irrelevant because that discussion pertained to troop levels throughout the
Middle East, encompassing Jordan and Kuwait, not exclusively Iraq. DLATS also
argues that the questions at the pre-proposal conference were "expressly not
incorporated into the Solicitation or Contract." (Gov't reply at 2) Contrary to
DLATS's characterization, ANHAM argues that the representations at the conference
were incorporated into the contract (app. opp'n at 31). ANHAM supports its argument
with citation to the copy of the contract in the Rule 4 file at tab 27. On page 2 of that
exhibit, the contract provides that the solicitation, the amendments to the solicitation
and ANHAM's proposals are incorporated into the contract. Also contrary to DLATS's
argument, it is not clear from the text of Amendment No. 0003 that the government's
expectations for a drawdown period applied only to zones outside Iraq. Only one of the
three statements in which DLATS predicts a drawdown period refers to the wider
Middle East. Nor is it clear that government references to a future ramp down of troops
is a change to the requirements of the solicitation.
These and other disputed material facts prevent consideration of summary
judgment on this record.
C. DLA TS Requests Summary Judgment on Three Theories.
1. The Contract did Not Shift Risk of Misrepresentation onto the
Contractor.
By its motion, DLATS makes the same misrepresentations to the Board that it
made to ANHAM during performance. The government recognizes in its motion that
ANHAM claims that DLATS breached the implied duty of good faith and fair dealing
by withholding information regarding the withdrawal of United States forces from Iraq.
8
The government nonetheless claims it is entitled to judgment as a matter of law because
ANHAM assumed the risk of troop withdrawals. DLATS claims ANHAM was aware
of widely disseminated public information that the government was pursuing an
agreement for troop withdrawal and no one, including DLATS, knew until October
2011 whether troops would remain in Iraq. DLATS represents that the agency was
unaware early in 2011 of internal plans to ensure the complete withdrawal of American
troops from Iraq. DLA TS claims it could not violate its duty to cooperate with
ANHAM because it simply did not possess information with which it could mislead the
contractor. DLATS goes so far as to claim informing ANHAM in July or September
2011 that all troops would be out of Iraq in December would have been "a risky wild
guess" (gov't reply at 8). This assertion is not merely contrary to ANHAM's
allegations, it is baseless.
ANHAM' s claim that it was misled by DLATS is based upon the issuance of
OPORD 11-1. It claims that DLATS possessed precise knowledge of the planned
precipitous drop in "mouths to feed" between October and December 2011 (app. opp'n,
ex. A). Specifically, the military was directed in May 2011 by amendment to OPORD
11-1 to prepare for and execute withdrawal of all troops by 18 December 2011, including
a drastic reduction of troops beginning 14 October. DLATS does not attempt to refute
ANHAM's allegations. DLATS apparently believes it can ignore allegations pertaining
to OPORD 11-1. This is similar to DLATS' s assertions to ANHAM during the contract.
It would like to be considered ignorant of the plans to withdraw troops from Iraq in 2011.
Perhaps it believes this feigned ignorance is somehow persuasive in litigation as well. It
is not.
As noted above, ANHAM supports its allegations with documents in the Rule 4
file, other external documents and the affidavit of its senior vice president. The
correspondence shows DLATS insisted ANHAM maintain the peak level of provisions
through the end of 2011, contrary to the planned withdrawal of troops (app. opp'n, ex. F).
As late as September 2011, the contracting officer informed ANHAM that the agency
·'has yet to receive official information available for public release regarding the
reduction of personnel in Iraq and Kuwait" (R4, tab 72 at 52). Following that, the
contracting officer specifically encouraged ANHAM to utilize inflated projections of
troops to be fed through 2011 and into 2012 (app. opp'n, ex. A ii 24).
This evidence is sufficient to establish a prima facie case of breach of the duty of
good faith and fair dealing by DLATS. The government's plan to withdraw troops was
vital information for the contractor to plan and execute its performance through 2011.
ANHAM did not assume the risk that the government would withhold or falsify
information regarding the troops to be fed in October, November and December of
2011. Having assumed the contractual obligation to formulate troop projections and
maintain food inventory based on the projections, ANHAM necessarily asked the
government for information to make its projections as accurate as possible. If the
government responded with false information it would have acted to specifically
9
undermine the contractor's ability to obtain the fruits of the contract within the terms of
the bargain.
This contract, like other contracts, implicitly contains a covenant of good faith
and fair dealing. MetcalfConstr. Co. v. United States, 742 F.3d 984, 990 (Fed. Cir.
2014). The covenant imposes on each party a "duty not to interfere with the other
party's performance and not to act so as to destroy the reasonable expectations of the
other party regarding the fruits of the contract." Lakeshore Eng 'g Servs., Inc. v. United
States, 748 F.3d 1341, 1349 (Fed. Cir. 2014). The duty is found within the context of
the contract to ensure neither party acts inconsistent with the contract's purpose or
deprives the other party of the contemplated value. MetcalfConstr., 742 F.3d at 991.
The government's motion disregards these principles when it argues that the contract
limits its exposure to ANHAM' s costs. The government cannot rely upon its limited
obligations in the Indefinite-Quantity clause to preclude recovery by ANHAM (gov't
mot. at 27). The Indefinite-Quantity clause does not shield DLATS from its obligation
of good faith in performance. John McCabe, ASBCA No. 36958, 89-2 BCA ~ 21,857.
In that clause, ANHAM agreed that the government may exercise its discretion to limit
the amount of business it will do and it will not be liable for purchases beyond that
amount. Thus, the contractor agreed to cede determination of the scope of the contract
to the government's discretion. In doing so, it did not also surrender the government's
compliance with other contractual obligations. Case law uniformly recognizes that
contract provisions that grant the government discretion are accompanied by an implied
obligation not to abuse that discretion and to act in good faith. Id. at 109,948 (citing
Monarch Enterprises, Inc., ASBCA No. 31375, 86-3 BCA ~ 19,227 at 97,224). Here,
ANHAM claims the government failed to act in good faith when it purposefully
thwarted the contractor's ability to formulate troop projections. It further claims that
DLATS' s misrepresentations deprived ANHAM of the means of contract performance
and the ability to protect itself from unreasonable increased costs.
The purpose of this contract was for ANHAM to act as the Prime Vendor to
federal customers in Iraq, Kuwait and Jordan for the supply and delivery of food and
non-food items (gov't mot. at 2, 4). This responsibility included inventory management
which required ANHAM to determine the monthly demands and maintain a 45-day
supply in its warehouse (id. at 5). With those responsibilities, ANHAM assumed the
risk that decisions regarding troop deployment could result in unrecovered costs (id.). It
is evident that ANHAM' s ability to manage that risk would depend upon its skill in
inventory management which logically required the best assessment of demand
possible. It does not appear that the government was obligated to assist in the
assessment of demand. Thus, the nature of the bargain placed on ANHAM the burden
of determining the amount of food to stock in its warehouse and the risk that it could
overstock at its cost if demand decreased.
Assuming the risk of forecasting demand, ANHAM could not reasonably expect
the government to assist in determination of troop levels. But, ANHAM could reasonably
10
expect the government not to interfere in its monthly determinations. Contrary to that
reasonable expectation, ANHAM has provided evidence that the government advised it to
use inflated troop estimates when planning food demand in the final months of 2011. In
doing so, the government failed to act in good faith. Good faith in contractual relations
means "honesty in fact in the conduct or transaction concerned." McCabe, 89-2 BCA
ii 21,857 at 109,948. The government's alleged actions fail that standard even ifit could
offer a legitimate legal basis for withholding or misrepresenting this information. The
mere lawfulness of conduct by public officials does not preclude a tribunal from finding
that such conduct still violates standards of decency, fairness or reasonableness. JA.
Jones Constr. Co., ASBCA No. 43344, 96-2 BCA ii 28,517. Accordingly, drawing all
justifiable inferences in favor of the party opposing summary judgment, we conclude that
appellant has raised sufficient issues regarding the government's good faith and fair
dealing in performance of the contract to withstand summary judgment and entitle it to a
trial on the merits.
2. The Government Offers No Evidence to Support its Presumption that
ANHAM has No Compensable Damages.
The government argues that it is entitled to summary judgment because ANHAM
represented in its proposal that it had retained the warehouse that is the subject of its
claim for the entire length of the contract. DLATS claims that if ANHAM had initiated a
lease for the contract period it would not have incurred damages because its warehouse
costs would be covered as part of regular contract payments (gov't mot. at 26). DLATS
further asserts that ANHAM did not need to execute an extension of its agreement to
lease when it did. ANHAM' s decision was allegedly premature because the lease
extension was not required before the end of September 2011. DLATS insists that if
ANHAM's agreement to lease the warehouse covered the exact period of the contract
"there would have never been an issue about the Logistica lease expiring on
December 31, 2011 and its alleged damages would have been zero." (Gov't mot. at 28)
When faced with the decision whether to renew the warehouse lease, DLATS
argues ANHAM had two options to mitigate its costs (gov't mot. at 29). ANHAM
could have sought a three-month extension of the warehouse lease which would have
aligned it with the contract. Or, ANHAM could have obtained the six-month extension
which was already available in its agreement with Wazzan. That extension would have
gone only three-months longer than the contract. According to ANHAM, this is a
Hobson's choice. Neither option would have accommodated the excess inventory
procured pursuant to DLATS's false predictions. Thus, DLATS's argument is incorrect
because it is misdirected. The claim is not premised upon ANHAM' s alleged difficulty
with its decision to renew its agreement with Wazzan. ANHAM claims the
misrepresentation by DLATS of projected troop levels at the end of 2011 and beyond
caused the need for continued warehouse storage. ANHAM argues that the significant
volume of excess food required warehouse storage until 13 September 2013 (app. opp'n
11
at 46; R4, tab 72 at 68-71). Accepting that allegation as true, DLATS's argument for
summary judgment fails.
3. ANHAM's Claim is Not Presumptively Barred by the Sovereign Acts
Doctrine.
DLA asserts entitlement to summary judgment because ANHAM' s contract
claim is barred by the Sovereign Acts Doctrine. The sovereign acts defense is an
inherent element of every contract to which the government is a party, whether or not
explicitly stated. The government retains in every contract the authority to act as
sovereign unless it surrenders this right in "unmistakable terms." Hughes
Communications Galaxy, Inc. v. United States, 998 F.2d 953, 958 (Fed. Cir. 1993). In
this case, as DLATS argues, the United States' determination to withdraw troops from
Iraq pursuant to an agreement with the government of Iraq is a sovereign act. But, that
fact alone may not bar the claim. As described above, ANHAM's complaint does not
claim entitlement to compensation because there was a decision that troops would be
withdrawn. ANHAM's claim is that DLA's withholding of information regarding that
decision was contrary to its contract bargain. Concealing the plan to remove troops
from Iraq deprived ANHAM of the ability to manage the inventory and facilities it is
obligated to maintain under the contract.
The information ANHAM claims DLATS withheld was the specific military
direction regarding the departure of troops from Iraq. As discussed above, ANHAM
asserts that OPORD 11-01 explicitly established a date on which troops would leave
Iraq (am. compl. at 5-6, `` 18-9; app. opp'n at 10-12). DLATS's motion and reply are
silent regarding ANHAM's arguments regarding OPORD 11-01. This may be
DLATS's attempt to avoid discussion of that document based upon its security
classification. Failing to address the classification of OPORD 11-01, or to assert its
classification as a sovereign act, does not support its motion. There is no basis for
DLATS's failure to respond to ANHAM's arguments about the order or its discovery
requests. DLATS' s motion does not provide any reason for withholding information
regarding the number of troops to be fed in the ending months of the contract. The
government has apparently reserved those arguments for a hearing. Also, having
included this point as an affirmative defense in its answer, it tacitly acknowledges that it
must carry the burden of proof. DLATS does not to meet that burden on summary
judgment.
And DLA TS did not try in its motion to prove that a sovereign act prevented
compliance with its duty not to interfere with the contractor. Rather it presents its
sovereign act defense as afait accompli that warrants dismissal of ANHAM's complaint.
DLATS overstates this defense. At this point of discovery, it's not nearly so
accomplished. Even if the sovereign acts defense applies, "it does not necessarily mandate
dismissal." Carabetta Enters., Inc. v. United States, 482 F.3d 1360, 1365 (Fed. Cir. 2007)
(quoting United States v. Winstar, 518 U.S. 839, 895 (1996)). The government is excused
12
from performance under the sovereign acts defense only when the sovereign act renders
the government's performance impossible. Casitas Municipal Water Dist. v. United
States, 543 F.3d 1276, 1287 (Fed. Cir. 2008). The classification of OPORD 11-01 does
not establish that it was impossible for DLA to cooperate with ANHAM's contract
performance.
DLATS's presumption that the mere presence of a sovereign act results in
dismissal is based upon its reading of Robertson & Penn, Inc. d/b/a Cusseta Laundry,
Inc., ASBCA No. 55625, 08-2 BCA ~ 33,951. In that case the contractor was to supply
laundry services to military camps but the invasion of Iraq sharply reduced the amount
of services required in the camps. If that case is similar to this one, the similarity stops
there. In Robertson, the contractor claimed the government negligently estimated the
amount of laundry that would be done because it knew the troops would be deployed
away from the camps. The contractor's claim went further to blame the deployment
itself as a basis for entitlement to additional compensation. The Board rejected that
particular argument because the troop deployment was a sovereign act for which the
government is not liable in the context of the contract. That is not the nature of the
claim here.
Am. Gen. Trading & Contracting, WLL, ASBCA No. 56758, 12-1BCA~34,905
is a more analogous decision. Although also a negligent estimate claim, in that case the
Board separated the question of the government's reasonable care in estimating
requirements from the fact that those requirements might have been driven one way or
another by potential sovereign acts. The troop deployment that affected the laundry in
Am. Gen. Trading did not eliminate the government's obligation to exercise reasonable
care to estimate its requirements. If the contractor could show that the government
knew, or should have known, that the invasion of Iraq was imminent, and as a result its
laundry estimate for the camps was wrong, the government would be liable for the
breach resulting from that misrepresentation. The government's error would be its
failure to take into account a sovereign act. Based on that, the Board held that the
sovereign act defense did not apply to the contractor's negligent estimate claim.
That is the result here. The sovereign act defense does not apply to ANHAM's
fair dealing claim because the government's liability, if any, arises from DLATS's
failure to disclose information needed by the contractor. As in Am. Gen. Trading,
whether the government reasonably provided or withheld troop estimates from
ANHAM is a different question than whether those estimates might have been driven
one way or another by potential sovereign acts. ANHAM should have an opportunity to
demonstrate whether DLATS withheld its knowledge of the planned troop withdrawal.
13
CONCLUSION
The government's motion for summary judgment is denied. The government has
not established entitlement to summary judgment because material facts remain in
dispute and it is not entitled to judgment as a matter of law~
Dated: 20 July 2017
DONALD E. KINNER
Administrative Judge
Armed Services Board
of Contract Appeals
I concur (see separate opinion) I concur
RICHARD SHACKLEFORD
Administrative Judge Administrative Judge
Acting Chairman Acting Vice Chairman
Armed Services Board Armed Services Board
of Contract Appeals of Contract Appeals
14
OPINION BY ADMINISTRATIVE JUDGE SHACKLEFORD
I concur in the result because I agree that there are disputed material facts that
preclude summary judgment. I also concur in the examination and rejection of the
government's argument with respect to Sovereign Acts because that argument does not
depend upon the existence or nonexistence of disputed material facts.
The remainder of the opinion which analyzed several arguments to determine
whether the government could be entitled to judgment as a matter of law (were there no
material disputed facts) is obiter dicta and unnecessary to the results. I do not join in
that discussion.
Dated: 20 July 2017
RICHARD SHACKLEFORD
Administrative Judge
Acting Chairman
Armed Services Board
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. 59283, Appeal of ANHAM
FZCO, LLC, rendered in conformance with the Board's Charter.
Dated:
JEFFREY D. GARDIN
Recorder, Armed Services
Board of Contract Appeals
15