The Titan Corporation v. Support Systems Assoc.

[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
FILED
_____________ U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
No. 07-14673 FEBRUARY 26, 2009
_____________ THOMAS K. KAHN
CLERK
D.C. Docket No. 05-01533-CV-ORL-18DAB
THE TITAN CORPORATION, a
foreign corporation authorized
to transact business in Florida,
Plaintiff-Counter-
Defendant-Appellee,
versus
SUPPORT SYSTEMS ASSOCIATES, INC.,
a foreign corporation authorized to
transact business in Florida,
Defendant-Counter-
Claimant-Appellant.
____________
Appeal from the United States District Court
for the Middle District of Florida
____________
(February 26, 2009)
Before BARKETT, HILL and ANDERSON, Circuit Judges.
HILL, Circuit Judge:
The Titan Corporation sued Support Systems Associates, Inc. for failure to
make payments to it under a contract and the district court awarded it partial
summary judgment. After final judgment awarding damages was entered, the
defendant brought this appeal.
I.
Support Systems Associates, Inc. (“SSAI”) provides logistics and
engineering services to the government, primarily the Department of Defense. In
2003, SSAI and the Department of the Air Force (the “Air Force”) entered into a
contract for the development of a replacement for certain computer modules used
in special operations forces aircraft. Soon after SSAI entered into this contract,
SSAI entered into a subcontract with The Titan Corporation (“Titan”) to develop
the modules (the “Development Subcontract”). According to SSAI, Titan
indicated it would have working prototypes of the modules by July 2004. Titan
did not develop working prototypes by that date, but informed SSAI that it was
making progress with the development of the modules.
In September of 2004, the Air Force awarded a contract to SSAI for the
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production of the computer modules.1 On September 30, SSAI sent a letter of
intent to award a production subcontract to Titan that authorized it to initiate
material purchasing and charge labor hours on “this contract.” Although never a
formal contract, SSAI and Titan agree that they entered into a binding contract for
the production of the modules (the “Production Subcontract”)supported by a series
of draft documents.
The Production Subcontract provided for Titan to receive progress
payments and set forth procedures for invoicing and payment. Pursuant to the
subcontract, Titan submitted its invoice and the required data to SSAI for its first
progress payment under the Production Subcontract in the amount of
$1,081,915.78, which represented ninety percent of the start-up costs allegedly
incurred by Titan from September 29, 2004 through October 22, 2004. SSAI, in
turn, submitted this invoice to the Air Force on November 17, 2004. In December
2004, SSAI received Titan’s progress payment from the Air Force for the invoice.
It did not forward the payment to Titan.2 On March 14, 2005, SSAI directed Titan
to discontinue all work on the Development and Production Subcontracts.
In this lawsuit, Titan contends that SSAI breached the Production
1
SSAI and Titan agree that the award was prompted by the drawing near of the end of the
federal fiscal year and the need to commit the funds or lose them.
2
SSAI claims that it later returned the funds to the Air Force.
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Subcontract by failing to pay Titan the progress payment it received from the Air
Force. The district court agreed and awarded it summary judgment. We review
this grant of summary judgment de novo. Anderson v. Liberty Lobby, Inc., 477
U.S. 242 (1986).
II.
The parties do not dispute that Titan submitted an invoice for a progress
payment nor that the terms of the Production Subcontract provided for such
payments. Nor do they dispute that SSAI authorized Titan to begin purchasing
materials and charging labor to the Production Subcontract.
Rather, SSAI argues that Titan was not entitled to the progress payment
under the Production Subcontract because it had not delivered the working
prototypes required by the Development Subcontract. Thus, the issue on appeal is
whether Titan’s entitlement to the Production Subcontract progress payment was
contingent upon the making of progress under the Development Subcontract.
The resolution of this issue depends upon an interpretation of the
Production Subcontract. This is a question of law and one that is ripe for summary
judgment. Sevenson Envtl Srvs, Inc. v. Shaw Envtl, Inc. 477 F.3d 1361, 1364-65
(Fed. Cir 2007).
III.
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Although a formal Production Subcontract was never executed, the parties
agreed upon all of the material terms. One of these terms was the inclusion of the
Federal Acquisition Regulation 52.232-16(c) (April 2003) (the “FAR”) regarding
the making of progress payments to subcontractors.3 Under this regulation, SSAI
was permitted to “reduce or suspend progress payments” to its subcontractors if
SSAI were to find “on substantial evidence” that the subcontractor’s
“[p]erformance of this contract is endangered by its . . . failure to make progress . .
. .” SSAI argues that Titan’s failure to deliver working prototypes, as required by
the Development Subcontract, constituted such a failure, thereby authorizing it to
withhold the Production Subcontract progress payment applied for by Titan,
requested by SSAI, and sent by the Air Force.
Titan, however, points out that the FAR language unambiguously conditions
Production Subcontract progress payments solely upon progress being made in the
performance of “this contract.” Since this language clearly refers to the
Production Subcontract, Titan contends that it is entitled to the progress payment.
SSAI contends, however, that this language does “no[t] limit what SSAI
3
Titan contends, and the record supports, that SSAI never relied upon FAR 52.232-16(c)
to support its right to withhold payment until after the district court entered its order granting
Titan partial summary judgment. We assume without deciding that SSAI did not waive its right
to make this argument.
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might consider in assessing Titan’s progress.” Under SSAI’s interpretation of the
contract, it could consider Titan’s progress under the Production Subcontract, the
Development Subcontract or any other federal contract that Titan might have had
with SSAI in evaluating Titan’s progress for Production Subcontract payment
purposes. This is an unacceptable interpretation of the contract and regulation.
When interpreting the Production Subcontract, we must give the ordinary
and plain meaning to its words and interpret it in a way that does not render any
portion of it meaningless. See California Or. Broad., Inc., v. United States, 74
Fed. Cl. 394 (2006). The ordinary and plain meaning of the words “in this
contract” clearly refer to the contract in which these words appear. This is the
Production Subcontract. Under SSAI’s interpretation, progress payments under
the Production Subcontract and its incorporated federal regulation could be
conditioned not only upon progress under “this” contract – the Production
Subcontract – but upon any contract.4 The words “in this contract” would be
rendered meaningless – an unacceptable interpretation of the ordinary meaning of
the words.
4
Similarly, we decline to interpret the regulations requirement that costs be “reasonable”
to mean anything more than reasonable costs for the progress made under the Production
Subcontract. We reject SSAI’s argument that the reasonableness of Titan’s production costs was
to be measured by its progress under the Development Subcontract.
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Additional support for this conclusion is found in the absence of any
reference in the Production Subcontract that payments for progress under it were
in any way conditioned upon or subject to progress under the Development
Subcontract. Clearly, if two separate entities had been awarded the Development
and Production Subcontracts, such an interpretation of either one that would
condition payment to one upon progress by the other would be an unacceptable
interpretation of the federal regulation. It is only because one entity received both
contracts in this case that this argument may be advanced at all.
Furthermore, had the parties intended that progress payments under the
Production Subcontract be conditioned upon progress under the Development
Subcontract, they could easily have documented such an understanding.
Finally, SSAI urges that even if we reject its interpretation of the federal
regulation as a matter of law, that somehow the interpretation of the Production
Subcontract becomes one of fact. We reject this contention. In order to hold that
the interpretation of the Production Subcontract and its accompanying regulation
is a matter of fact, we would have to find that the contract is vague or ambiguous
on the issue of progress “in this contract.” Community Heating & Plumbing Co. v.
Kelso, 987 F.2d 1575, 1579 (Fed. Cir. 1993). This we cannot do. The words “in
this contract” are not ambiguous, as we noted above. They say what they mean,
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and mean what they say. Under such circumstances, we are not permitted to make
them say something else. See Blonder & Co., Inc. v. Citibank, N.A., 808 N.Y.S.2d
214 (N.Y. App. 2006).
III.
Accordingly, the judgment of the district court is due to be
AFFIRMED.
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