Agility Public Warehousing Co. KSCP v. Mattis
852 F.3d 1370
Fed. Cir.2017Background
- Agility contracted with DSCP (2003) to deliver food to Kuwait/Iraq; pricing split into Delivered Price + Distribution Price; Mod. 1 allowed deliveries into Iraq and said trucks "will not be used at the sites for storage purposes."
- Mod. 2 (2003) set per-trip and per-day fees for Iraq deliveries with no cap on maximum payable days, so long truck detentions produced very large government payments.
- Due to prolonged turnaround times and storage shortages at some Iraq sites, the government unilaterally issued Mod. 19 (2004) to add transport liaison officers (TLOs); later negotiations produced Mod. 27 (Sept. 2004).
- Mod. 27 increased TLOs and restructured fees: established minimum trip days and a 29-day cap on payable trip days; additional days beyond minimums were payable only if delay was "customer caused" (e.g., Hub, DFAC or MKT lacking offload capability).
- Agility accepted Mod. 27 but pressed for the ability to submit "exceptions"; DSCP/CO Ford told Agility that "exceptions to the 29 day rule will only be considered in the form of a claim." Agility submitted claims for amounts beyond the 29‑day cap; the government denied them for inadequate support and otherwise.
- The Armed Services Board of Contract Appeals denied Agility’s appeal, holding Mod. 27 limited payment to 29 days (including storage-caused delays) and that Ford’s willingness to consider claims was discretionary; the Federal Circuit affirmed on express-breach and exceptions issues but vacated and remanded on implied-duty and constructive-change claims for further adjudication.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did the government breach the express contract (storage prohibition in Mod. 1) by using trucks for storage and refusing to pay beyond 29 days? | Mod. 1 prohibits use of trucks for storage; Mod. 27 addressed only fees and therefore did not displace the storage prohibition; government breached by using trucks as storage. | Mod. 27’s plain language made governmental delays (including storage-related lack of offload) a subset of customer‑caused delays and imposed a 29‑day cap on payable days, thereby superseding Mod. 1’s residual effect. | Court: Affirmed Board — Mod. 27 is unambiguous; it incorporates storage‑related delays into the customer‑caused exception and imposes the 29‑day cap, so no express breach. |
| Did the government promise to make exceptions to the 29‑day cap? | Ford’s email ("exceptions ... will only be considered in the form of a claim") amounted to an agreement to make exceptions if Agility documented government‑caused delay. | The email only promised to consider claims; it was a counteroffer and discretionary; Mod. 27 contains no binding exception language. | Court: Affirmed Board — government only agreed to consider exceptions via claims; Agility cannot nullify the 29‑day cap. |
| Did the government breach the implied duty of good faith and fair dealing (duty to cooperate by obtaining storage, facilitating truck returns)? | Even if Mod. 27 governs fee allocation, the government may have frustrated Agility’s reasonable expectations by failing to secure storage/assist returns, interfering with Agility’s performance. | Government contends compliance with Mod. 27’s terms defeats any implied‑duty breach. | Court: Vacated Board on this point — Board erred by not deciding the implied‑duty claim; remand to consider whether government conduct (e.g., failing to provide storage/deliberate delay) breached the implied duty and appropriate damages. |
| Did the government constructively change the contract by effectively using trucks as storage or otherwise altering performance requirements? | Government’s conduct increased instances where Agility’s trucks were used as storage beyond contract expectations — an effective, constructive change requiring relief. | Government says Mod. 27 addresses delays and fees; no constructive change. | Court: Vacated Board on this point — Board failed to address the constructive‑change claim; remand required for first‑instance consideration. |
Key Cases Cited
- Forman v. United States, 329 F.3d 837 (Fed. Cir.) (review standard: contract interpretation is a question of law)
- NVT Techs., Inc. v. United States, 370 F.3d 1153 (Fed. Cir.) (interpret contract by starting with its text and harmonizing provisions)
- Schism v. United States, 316 F.3d 1259 (Fed. Cir.) (parol evidence rule and when extrinsic evidence is barred)
- Centex Corp. v. United States, 395 F.3d 1283 (Fed. Cir.) (implied duty of good faith and fair dealing in government contracts)
- Int'l Data Prods. Corp. v. United States, 492 F.3d 1317 (Fed. Cir.) (constructive change doctrine defined)
- Bell/Heery v. United States, 739 F.3d 1324 (Fed. Cir.) (elements required to prove constructive change)
- Metcalf Constr. Co. v. United States, 742 F.3d 984 (Fed. Cir.) (limits on using implied duty to expand express contract terms)
- Upton v. Tribilcock, 91 U.S. 45 (U.S.) (contracting parties are bound by their contract words)