Cooper/Ports America, LLC

ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeals of -- )
)
Cooper/Ports America, LLC ) ASBCA Nos. 61349, 61350
)
Under Contract No. HTC71 l-15-D-R036 )

APPEARANCES FOR THE APPELLANT: W. Barron A. Avery, Esq.
William T. DeVinney, Esq.
William B. O'Reilly, Esq.
Katherine L. McKnight, Esq.
Baker & Hostetler LLP
Washington, DC

APPEARANCES FOR THE GOVERNMENT: Jeffrey P. Hildebrant, Esq.
Air Force Deputy Chief Trial Attorney
Lt Col Sondra Bell Nensala, USAF
Caryl A. Potter III, Esq.
Danielle A. Runyan, Esq.
Lawrence M. Anderson, Esq.
Trial Attorneys

OPINION BY ADMINISTRATIVE JUDGE SWEET
ON THE GOVERNMENT'S MOTION FOR SUMMARY JUDGMENT

These appeals involve a contract between the government and appellant
Cooper/Ports America, LLC (C/P A) to provide stevedoring services. The government
originally entered into the contract with Shippers Stevedoring Co. (Shippers).
However, C/PA purchased Shippers' interests in the contract, and entered into a
novation agreement with the government. The complaint in ASBCA No. 61349
alleges two counts. Count One alleges that C/PA relied upon government
misrepresentations that it would renegotiate the contract's prices when it entered into
the asset purchase and novation agreements. Count Two alleges that the government's
misrepresentation breached the covenant of good faith and fair dealing. The complaint
in ASBCA No. 61350 also alleges that the government's subsequent failure to
renegotiate the contract's prices breached the covenant of good faith and fair dealing.

The government has moved for summary judgment in both appeals, arguing
that it is entitled to judgment as a matter of law because there are no genuine disputes
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suggesting a misrepresentation or breach of the covenant of good faith and fair
dealing. C/P A opposes that motion on the grounds that it has raised genuine disputes. 1

For the reasons discussed below, there is a genuine dispute as to whether the
government made a misrepresentation. However, C/P A cannot genuinely dispute that
the government complied with the covenant of good faith and fair dealing. Therefore,
we grant the government's motion for summary judgment in part. We strike
Count Two of ASBCA No. 61349, and deny the appeal in ASBCA No. 61350.
Otherwise, we deny the government's motion for summary judgment.

STATEMENT OF FACTS (SOF) FOR PURPOSES OF THE MOTION
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1. On January 28, 2015, the United States Transportation Command
(government) awarded Contract No. HTC7 l l-l 5-D-R036 (036 contract) to Shippers to
provide stevedoring and related terminal services at ports in the Southeast United
States (R4, tabs l, 4 ). 2

2. Christopher Smith 3 declares that Shippers sustained significant losses on the
036 contract because the contract prices were insufficient to cover Shippers' costs
(app. resp., ex. B ,i 4). According to Mr. Smith, sometime prior to March 2016, C/PA
began exploring the possibility of acquiring Shippers, including its interests in the 036
contract (id. ,i 3 ).

3. Mr. Smith declares that, at a conference in May 2016, he discussed the
possibility of C/PA acquiring Shippers with William Fugate, a contracting officer
(CO) (May conversation) (app. resp., ex. D). According to Mr. Smith, he:

[S]pecifically expressed [his] concerns that the financial
terms of the [036] Contract were unsustainable and said to
[Mr. Fugate], ''the reason Shippers was for sale was they
were going to go bankrupt because of the military
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contracts .. .if we acquired them it could crush us too.

1
C/P A also has moved for leave to file a sur-reply. Because the government raised
new arguments in its reply, we grant that motion.
2
Unless otherwise indicated, all citations to the Rule 4 file are to the Rule 4 file in
ASBCA No. 61349.
3
From December 2010, through December 2016, Mr. Smith was Senior Vice
President, Network Development, at Ports America Management, Inc.,
which became a co-owner of C/PA. He served on C/PA's Board of Directors.
(App. resp., ex. B ,i,i 1-2)

2
(App. resp., ex. B 11 5-6) Mr. Smith declares that Mr. Fugate responded that, "[t]he
Government is not in the business of putting companies out of business, you would

I have to novate the contract then file a claim and we would work with you" (id. 1 7).
Mr. Smith interpreted that as an assurance that the government would work with C/P A

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to renegotiate the 036 contract's prices if and when C/P A became a party to the
contract (id.). According to Mr. Smith, C/PA relied upon the representations in
deciding to purchase Shippers (id. ~ 8 ).

I 4. Mr. Fugate admits that, during the May conversation, C/P A expressed
an interest in purchasing Shippers, and a concern about the 036 contract's prices
(app. resp., ex. Cat 67). However, Mr. Fugate testified that his response was that, if
C!P A acquired the contract, "their only recourse would be to file a claim.... But we
could not make any guarantee that claim would be approved." (Id. at 68) Mr. Fugate
denied that he said the government would renegotiate or adjust prices. He merely
indicated that any change would depend upon what the claim stated, and the facts in
the claim. (Id. at 69) Mr. Fugate does not recall if he used the exact words "work
with'' (id. at 73).

5. On September 30, 2016, Integrated Marine Services, LLC (Integrated) - r
which subsequently changed its name to C/P A-purchased substantially
all of Shippers, including Shippers' interests in the 036 contract (R4, tab 13). On
September 30, 2016, Shippers and Integrated also submitted a request to the
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government for novation regarding the 036 contract (R4, tab 22 at 71-73 ).

6. On October 1, 2016, C/PA began performing the 036 contract (R4, tab 31 ).
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7. In October 2016, Chris Lewis, C/P A's Vice President of Operations,
II contacted William Seamon, another CO, to discuss renegotiating the 036 contract's
prices (October conversation) (app. resp., ex. Eat 86). Mr. Seamon responded that he
could not speak directly to C/P A about the contract until there had been a novation
(id.; app. resp., ex. A at 126-27). However, Mr. Lewis declares that Mr. Seamon
"assured me ... that the [government] would be willing to 'work with' C/PA on
correcting the contracts' pricing issues ... after the contracts had been successfully
novated to C/P A" (R4, tab 22 at 75, 17). At his deposition, Mr. Lewis gave the
following answers to the following questions:

Q. What were the exact terms used by Mr. Seamon
[during the October conversation]?

A. During our conversation, Mr. Seamon said that
they would be willing to work with C/P A.

Q. And did he use the term "negotiate"?

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1 A. I don't recall him using the direct term

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·'negotiate."

Q. So what do you mean by the term "negotiate"?

A. What I mean by the term "work with" could also
include negotiate.

THE REPORTER: ·'Question: So did Mr. Seamon
agree to renegotiate the pricing terms of the contract?"'

THE WITNESS: Mr. Seamon agreed to work with
us.

Q. So your answer to that question would be-

A. Mr. Seamon agreed to work with us.

Q. It's a yes or no question.

MR. AVERY: Can you ask the question again?

THE REPORTER: "Question: So did Mr. Seamon
agree to renegotiate the pricing terms of the contract?"

THE WITNESS: To specifically renegotiate? No.

(Gov't reply, ex. R-1 at 88-91) Mr. Seamon testified that he did not say that he would
work with C/PA to renegotiate prices after novation (gov't mot., ex. A at 129-30).
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8. On November 15, 2016, the government signed a novation agreement,
approving the September 30, 2016 sale (R4, tab 10 at 8-9). Effective December 22,
2016, the government issued a modification, which incorporated the novation
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agreement. The modification did not change prices or require the government to
renegotiate prices. On the contrary, it provided that, other than the contractor, "[a]ll
other terms and conditions remain unchanged." (R4, tab 10 at 1)

9. After the novation, C/P A requested revision to the 036 contract's prices
(app. resp., ex. A at 144, exs. F-G; R4, tab 42).

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I I 0. On January 3L2017. the government rejected C/P A's request to
renegotiate prices (R4. tab 42).

11. C/P A responded on March 15, 2017, with a notice of intent to file a claim.
The notice stated that C/P A was entitled to reformation of the 036 contract, and
requested a meeting. (R4, tab 15 at 2-3)

12. C/P A and the government held a meeting on March 23, 2017, to discuss
the notice of intent. At that meeting, the government refused to renegotiate prices.
(App. resp., ex. A at 163. ex. Hat 2, ex. I at 180)

13. On June 26, 2017, C/PA filed a request for equitable adjustment (REA),
asserting that the 036 contract should be reformed due to a unilateral mistake (ASBCA
No. 61350 (61350) R4, tab 67 at 5-6).

14. On August 1, 2017, CIPA filed a certified claim (Claim II) 4 (R4, tab 22).
Claim II first asserted that the government misrepresented its intent to renegotiate
prices when it stated that it would work with C/P A (id. at 7). In support of that
assertion. Claim II cited the October conversation, but not the May conversation
(id. at 7, 75). Claim II also asserted that the government breached the covenant
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of good faith and fair dealing by misrepresenting its intent to renegotiate prices
(id. at 7-8). C/PA attached to Claim II copies of its notice of intent to file a claim and
REA, both of which sought reformation of the 036 contract (id. at 84-85, 92, 95-97,
99-101).
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15. On August 1, 2017, C/PA also filed another certified claim (Claim Ill),
which asserted that the government breached the covenant of good faith and fair
dealing by failing to renegotiate prices after the parties executed the novation
agreement (61350 R4, tab 22 at 5-6).

16. The CO denied both Claim II and Claim III on September 20, 2017 (R4,
tab 23; 61350 R4, tab 23).

I 7. C/P A appealed the denial of Claim II, which we docketed as ASBCA
No. 61349. The ASBCA No. 61349 complaint contains two counts. Count One
alleges that the government misrepresented that it was willing to renegotiate prices
(comp 1. ,i,i 32-38). Count Two alleges that the misrepresentation constituted a breach
of the covenant of good faith and fair dealing (id. ,i,i 39-46).

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The claims filed on August 1, 2017, are entitled Claim II and Claim III respectively
(R4, tab 22: 61350 R4, tab 22). For ease of reference, we adopt that naming
convention.

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18. C/P A also appealed the denial of Claim III, which we docketed as ASBCA
No. 61350. The ASBCA No. 61350 complaint alleges that the government's failure
to renegotiate prices breached the covenant of good faith and fair dealing (613 50
compl. 1131-37).

DECISION

I. The Standards for Summary Judgment

We grant summary judgment if a moving party has shown that there are no
genuine issues of material fact, and it is entitled to judgment as a matter of law.
Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). A non-movant seeking to
defeat summary judgment by suggesting conflicting facts must set forth specific
facts showing that there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 248 (1986). Thus, if the non-moving party carries the burden of
proof at trial for elements of its case and fails to provide such proof, the moving
party is entitled to summary judgment. Dairyland Power Coop. v. United States,
•·
16 F .3d 1197, 1202 (Fed. Cir. 1994 ). In deciding summary judgment motions, we
do not resolve controversies, weigh evidence, or make credibility determinations.
Liberty Lobby, 477 U.S. at 255. Moreover, we draw all reasonable inferences in favor
of the non-movant. Id.

II. There is a Genuine Dispute About Whether there was a Misrepresentation

The government is not entitled to judgment as a matter of law on ASBCA
No. 61349 Count One because there is a genuine dispute about whether the
government made a misrepresentation. "Where, due to misrepresentation of one
party and the mistake of the other, a written contract fails to express the agreement
which they had manifested an intent that the writing should express, the victim of
the misrepresentation can get a decree of reformation of the writing." Rainbow Valley
Corp., ASBCA No. 11691, 68-2 BCA, 7195 at 33,413-14; see also RESTATEMENT
(SECOND) OF CONTRACTS § 166 ( 1981 ). 5 In order for a misrepresentation to be a basis
for equitable relief, it must be a misstatement concerning a material fact upon which

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Reformation is not a final remedy; it merely establishes the real contract, and thus
enables the aggrieved party to recover under the contract in an action at law.
Rainbow Valley, 68-2 BCA, 7195 at 33,414-15. The victim of a
misrepresentation may elect to obtain relief in an action at law under one of the
following theories: ( 1) damages for being led into the transaction;
(2) rescission of the contract and restoration to his pre-contract position; or
(3) enforcement against the wrongdoer of the kind of bargain he represented he
was making. Id.

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the other party relied. Rainbow Valley, 68-2 BCA ,i 7195 at 33,413-14. A promise
accompanied by a misstatement of existing fact may constitute a misstatement of
material fact. Id. (holding that the government made a misrepresentation when it
induced the contractor to enter into a contract by orally promising to limit the exercise
of the government's contractual right to cancel a contract to cases where there was a
national emergency). The rational for reformation based upon a misrepresentation is
that it would be unjust to allow one who made a misrepresentation to retain the fruits
of a bargain which was induced by such misrepresentation. Dae Lim Indus. Co.,
ASBCA No. 28416, 86-3 BCA iJ 19,244 at 97,320. 6

Here, there are genuine disputes about whether the COs stated that they would
work with C/PA, and if so, whether the most reasonable understanding of that
statement would be that the government agreed to renegotiate the 036 contract's prices
(SOF ,i,i 3-4, 7). Moreover, there is a genuine dispute about whether C/P A in fact
relied upon the alleged misrepresentation (SOF ,i 3). Finally, there is a genuine
dispute about whether any misrepresentation concerned a material fact. See Rainbow
Valley, 68-2 BCA ,i 7195 at 33,414. Therefore, there are genuine issues of material
fact as to whether the government made a misrepresentation. Id. As a result, the
government is not entitled to judgment as a matter of law.

The government first argues that we do not possess jurisdiction over the
misrepresentation claim because it actually is a fraudulent inducement claim, which
sounds in tort (gov't reply at 1). However, we have exercised jurisdiction over
misrepresentation claims. Lee's Ford Dock, Inc., ASBCA No. 59041, 16-1 BCA
~ 36,298 at 177,010-11; Defense Sys. Co., ASBCA No. 50918, 01-1 BCA ,i 31,152
at 153.878-79: Rainbow Valley, 68-2 BCA ,i 7195 at 33,414. That is because
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misrepresentation claims relate to a contract by challenging the validity of an express
contract. 41 U.S.C. §§ 7103(a)(l), 7105(e)(l)(A); Frank L. Black, Jr., Inc. v. United
States, 183-79C, 1982 WL 36720, at *10 (Ct. Cl. Trial Div. Aug. 10, 1982) (rejecting
the argument that the Court of Claims did not possess jurisdiction over a
misrepresentation claim because it was a fraudulent inducement claim); see also
RESTATEMENT (SECOND) OF CONTRACTS § 166; Trusted Integration, Inc. v.
United States, 659 F.3d 1159, 1163-66 (Fed. Cir. 2011) (recognizing that the same
operative facts may support both a contract claim and a tort claim).
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Second, the government argues that w.e do not possess jurisdiction over the
portion of the misrepresentation claim related to the May conversation because C/P A
did not present facts related to the May conversation to the CO (gov't reply at 2-3 ).
We do not possess jurisdiction to entertain a claim unless a contractor presented it to

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While C/PA alleges bad faith, (61349 compl. ,i,i 37-38), it is not necessary to prove
bad faith in order to establish a misrepresentation claim. Dae Lim, 86-3 BCA
,i 19,244 at 97,320.

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the CO. Monica Walker, ASBCA No. 60436, 16-1 BCA, 36,452 at 177,656. A claim
is a new claim that was not presented to the CO if it is not based upon a common or
related set of operative facts. Id. at 177,657. "The introduction of additional facts
which do not alter the nature of the original claim ... do not constitute new claims."
Trepte Constr. Co., ASBCA No. 38555, 90-1 BCA, 22,595 at 113,385-86.
Therefore, "merely adding factual details ... does not create a different claim." K-Con
Bldg. Sys., Inc. v. United States, 778 F.3d 1000, 1006 (Fed. Cir. 2015); see also
Allied-Signal Aerospace Co., ASBCA No. 46890, 94-3 BCA, 27,089 at 134,981.

Here, Claim II asserted that the government misrepresented its intent to

I renegotiate prices when it stated that it would work with C/P A (SOF , 14 ). The
only example of that purported misrepresentation cited by Claim II was the October
conversation (id.). However, the introduction of the additional factual detail that the
government purportedly made the same statement during the May conversation too
does not alter the nature of the original claim. Rather, the nature of C/PA's
misrepresentation claim continues to be that the government allegedly misrepresented
its intent to renegotiate prices when it stated that it would work with C/PA. (Id.)
Therefore, C/PA's assertions about the May conversation do not constitute a new
claim. K-Con, 778 F.3d at 1006; Trepte, 90-1 BCA, 22,595 at 113,385-86.

Third, the government argues that there is no genuine issue of material fact
because the COs never stated that they would "renegotiate" prices during the May or
October conversations (gov't reply at 5-12). However, Mr. Smith declares, and
Mr. Lewis declares and testifies, that the COs stated that the government would "work
with" C/PA (SOF ,, 3, 7). 7 That evidence raises a genuine dispute as to whether the
COs stated that they would work with C/P A. Moreover, it is reasonable to infer from
any statement that the government would work with C/P A that the government would
renegotiate the 036 contract's prices, even if the COs did not use the precise word
"renegotiate" (id.). Whether the evidence from Mr. Smith and Mr. Lewis constitutes
clear and convincing evidence that the COs stated that the government would work
with C/P A-and whether the most reasonable inference from that statement would be
that the government would renegotiate the 036 contract's prices-are factual issues
that we cannot resolve at this stage.
ii

I The government finally argues that C/P A could not have relie4 upon the
October conversation because it already had signed the asset purchase agreement

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with Shippers and submitted a request for novation prior to that conversation
(gov't reply at 10). However, whether C/P A relied upon the October conversation

II 7
The government attempts to minimize the value of Mr. Smith's statements by
pointing out that he made them in a declaration (gov't reply at 11). However, it
I is acceptable to use declarations to establish that a fact is genuinely disputed.
I FED. R. CIV. P. 56(c)(l), (c)(4).

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raises factual issues genuinely in dispute. Those include whether C/P A understood the
alleged October promise as a reaffirmation of any earlier May promise to work with
CIP A, or whether C/P A could and would have revoked the asset purchase agreement
and novation request absent the October promise.

Because none of the government's arguments have merit, we reject its motion
for summary judgment on the misrepresentation claim.

III. C/P A Cannot Genuinely Dispute that the Government Complied with the
Covenant of Good Faith and Fair Dealing

The government is entitled to judgment as a matter of law on ASBCA
No. 61349 Count Two and ASBCA No. 61350 because C/PA cannot genuinely dispute
that the government complied with the covenant of good faith and fair dealing. Every
contract imposes upon each party a covenant of good faith and fair dealing in its
performance and enforcement. Metcalf Constr. Co. v. United States, 742 F.3d 984,
990 (Fed. Cir. 2014). The covenant includes 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. Id. The breach of the covenant of good
faith and fair dealing typically involves some variation on the "bait-and-switch.''
Precision Pine & Timber, Inc. v. United States, 596 F.3d 817, 829 (Fed. Cir. 2010).
Under the bait-and-switch, the government first enters into a contract that awards a
significant benefit in exchange for consideration. Id. Then, the government eliminates
or rescinds that contractual provision or benefit through a subsequent action directed at
the existing contract. Id.

A breach of an implied covenant of good faith and fair dealing does not require
a violation of an express provision in the contract. Metcalf, 742 F .3d at 994.
However, a party cannot use an implied covenant of good faith and fair dealing to
expand another party's contractual duties beyond those in the express contract, or to
create duties inconsistent with the contract's provisions. Agility Pub. Warehousing
Co. KSCP v. Mattis, 852 F.3d 1370, 1384 (Fed. Cir. 2017). Thus, while pre-contract
actions may bear on the question of whether the government complied with its
obligations that the contract eventually imposed, the pre-award conduct itself cannot
breach the duty "because the covenant did not exist until the contract was signed."
Scott Timber Co. v. United States, 692 F.3d 1365, 1372 (Fed. Cir. 2012). Thus, the
duty "does not deal with good faith in the formation of a contract." Id. (quoting
RESTATEMENT(SECOND)OFCONTRACTS § 205 cmt. c (1981)).

Here, even inferring that the COs made pre-modification representations that
they would renegotiate the 036 contracf s prices, that would not demonstrate that the
modified 036 contract awarded a significant benefit to C/PA because it is undisputed
that the modified 036 contract itself did not require the government to renegotiate

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prices (SOF ~ 8). Nor was the purported subsequent refusal to renegotiate prices
directed at eliminating or rescinding an existing provision of, or benefit under, the 036
contract because no existing provision of the modified 036 contract required the
government to renegotiate prices, and the modified 036 contract did not extend the
benefit of renegotiating prices to C/P A (id.). Therefore, there is no evidence
reasonably suggesting a bait-and-switch. Precision Pine, 596 F.3d at 829.

On the contrary, C/PA improperly seeks to use the covenant of good faith and
fair dealing to create duties inconsistent with the modified 036 contract's provisions by
requiring the government to renegotiate prices. when the modified 036 contract
expressly stated that. except for the contractor, all the terms and conditions of the
original 036 contract-including the prices-would remain unchanged (SOF ,i 8).
Thus, a breach of the covenant of good faith and fair dealing claim is not the proper
legal theory pursuant to which C/PA may seek to compel the government to
renegotiate the 036 contract's prices. Agility, 852 F.3d at 1384.

Additionally, C/PA's contentions that the government breached the covenant of
good faith and fair dealing fail because they deal with good faith in the formation of
the novated 036 contract that made C/PA a party to the 036 contract, and therefore
extended the covenant of good faith and fair dealing to C/P A. Scott Timber, 692 F .3d
at 13 72. C/P A cannot avoid that conclusion by parsing the alleged pre-modification

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promise to renegotiate prices and the alleged post-modification failure to keep that
promise by renegotiating prices (app. resp. at 18-21 ). The covenant of good faith and
fair dealing involves two interrelated steps: a bait and a switch. Precision Pine, 596
F.3d at 829. Even though the alleged switch (i.e., breaking the promise to renegotiate
prices) occurred after the modification, it still dealt with good faith in the formation of
i the modified 036 contract because the bait to which it related (i.e., the alleged promise
I to renegotiate prices) was pre-award conduct.

I Teresa A. Mc Vicker, P.C.. ASBCA Nos. 57487. 57653, 12-2 BCA ,i 35,127

I at 172.463-64-upon which C/P A relies (app. resp. at 19)-does not compel a
different conclusion. Unlike in the present case. Teresa A. Mc Vicker involved a
bait-and-switch by the government. The government first entered into a contract that
awarded a significant benefit to the contractor-namely to be paid for providing the
services of physician's assistants (PAs). Then, the government eliminated that benefit
by hiring the P As to work directly for the government. Id. We merely found that the
government's pre-award conduct bore on the government's compliance with the duty
the contract eventually imposed because it showed an intent to deprive the contractor
of the contractual benefit of being able to provide P As. Id. Here, by contrast, the 036
contract did not award a significant benefit by promising to renegotiate prices (SOF
,i 8). Rather, C/P A improperly seeks to expand and alter the government's duties
under the 036 contract by using the covenant of good faith and fair dealing to change

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the 036 contract's prices. Therefore, unlike in Teresa A. Mc Vicker, CIPA's breach of
the covenant of good faith and fair dealing claim fails as a matter of !av.:.
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I CONCLUSION l
I For the reasons discussed above, we grant the government's motion for
summary judgment on the breach of the covenant of good faith and fair dealing claims.
Accordingly, ASBCA No. 61350 is denied and we strike Count Two of ASBCA
No. 61349. However, we deny the government's motion for summary judgment
regarding the misrepresentation claim contained in Count One of ASBCA No. 61349.

Dated: March 12, 2019

Administrative Judge
Armed Services Board
of Contract Appeals

I concur I concur
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RICHARD SHACKLEFORD ow§it:~/WILSON
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 Nos. 61349. 61350, Appeals of
Cooper/Ports America, LLC, rendered in conformance with the Board's Charter.

Dated:

JEFFREY D. GARDIN
Recorder, Armed Services
Board of Contract Appeals