G4S TECHNOLOGY LLC, Plаintiff, v. The UNITED STATES, Defendant.
No. 12-8C
United States Court of Federal Claims.
February 11, 2014
114 Fed. Cl. 662
To be sure, the agency has not changed its interpretation of the non-manufacturer rule, but we are now presented with an “abstract disagreement” and not a “specific live grievance.” Lewis v. Cont‘l Bank Corp., 494 U.S. 472, 479, 110 S.Ct. 1249, 108 L.Ed.2d 400 (1990) (citations omitted) (internal quotation marks omitted). Plaintiff argues that the agency‘s interpretation of the non-manufacturer rule will matter to it if it “outgrow[s] even the new size standard,” Pl.‘s Opp‘n at 4, but this “amounts to a request for advice as to what the law would be upon a hyрothetical state of facts . . . or with respect to contingent future events that may not occur as anticipated, or indeed may not occur at all.” Cont‘l Bank Corp., 494 U.S. at 479-80, 110 S.Ct. 1249 (citations omitted) (internal quotation marks omitted).5 Plaintiff‘s controversy with the government concerning its eligibility as an offeror is now moot. When a matter becomes moot, we lose subject-matter jurisdiction over it, and dismissal under
IT IS SO ORDERED.
David A. Levitt, U.S. Department of Justice, Washington, DC, with whom were Stuart F. Delery, Principal Deputy Assistant Attorney General, and Jeanne E. Davidson, Director, for defendant.
OPINION
FIRESTONE, Judge.
In this case, G4S Technology LLC (“G4S” or “plaintiff“)1 alleges that it was an intended third-party beneficiary of a 2009 Loan and Security Agreement (“Lоan Agreement“) between the United States Department of Agriculture‘s Rural Utilities Service (“RUS“) and Open Range Communications, Inc. (“Open Range“).2 Under the Loan Agreement, RUS agreed to provide funds to Open Range that were to be used to construct a wireless broadband network in hundreds of rural communities under the Rural Development Broadband Loan and Loan Guarantee Program. G4S, which was one of Open Range‘s vendors, alleges that RUS breached its promise to pay G4S for $10,321,340.11 worth of services that remained due to G4S after Open Range filed for bankruptcy in 2011.
Pending before the court is the defendant, the United States’ (“the government“) motion to dismiss plaintiff‘s complaint under Rules
For the reasons discussed below, the court finds that it has jurisdiction to consider the plaintiff‘s claim, and that the government is entitled to summary judgment.
I. STATEMENT OF FACTS3
a. The 2009 Loan Agreement
On January 9, 2009, Open Range and RUS entered into a Loan Agreement by which RUS agreed to make a $267,298,000 loan to Open Range to finance construction of wireless broadband in 540 RUS-approved markets. See Pl.‘s Suppl. Resp. at 4. The Loan Agreement established two conditions required for closure. First, One Equity Partners III, L.P. (“OEP“), a private equity firm with an interest in Open Range, was required to deposit $97 million into Open Range‘s deposit account. See Pl.‘s Suppl. Resp. App. at A222. This amount was to be used for оperating expenses and construction of broadband networks outside of the RUS-approved markets (“Non-RUS Markets“). See id.; 2d. Am. Compl. Ex. A at 7;
b. Funding procedures under the Loan Agreement
The Loan Agreement required Open Range to establish a pledged deposit account into which RUS would deposit loan funds. Id. at A202-03. Funds in the pledged deposit account were to be used solely for the
For advances to be used for engineering services (such as those provided by G4S), the Bulletin generally required that Open Range and the vendor forward a RUS Form 245 to RUS for approval. Id. at A238. If approved, RUS wаs to send one copy of the approval to Open Range and one copy to the vendor. Id. The Bulletin also established procedures for small-scale construction contracts. When an outside contractor was used, the Bulletin required that either a RUS Contract Form 773 or other appropriate RUS contract be used. Open Range, as the borrower, was required to finance small-scale construction projects (i.e., those of amounts not exceeding $500,000), and obtain reimbursement with loan funds once construction was completed. Id. at A239.5 It is undisputed that there was no provision in the Loan Agreement to provide direct payment from RUS to the third-party vendors hired by Open Range.
c. Master Services Agreement
Open Range‘s relationships with the third-party vendors such as G4S, which it hired to help carry out its obligations under the Loan Agreement, were each governed by a Master Sеrvice Agreement (“MSA“). The MSA established a variety of requirements on third-party vendors and Open Range, including the markets and committed dates, technical specifications, general scope of work, and pricing. See Compl. Ex. C at 13. Plaintiff has provided evidence that Open Range submitted for RUS‘s review, comment, and approval, a template of the MSA that it used for most of its vendors.6 See Pl.‘s Suppl. Resp. App. at A356-60 (e-mail message from Open Range seeking RUS feedback on MSA and vendor selection process).
The MSA that G4S and Open Range executed contained provisions related to the work ordering process. Specifically, the MSA required that work being performed in RUS-approved markets be conducted pursuant to an approved six-month plan and the terms of RUS Forms 245 or 773. See Compl. Ex. C. at 3. For RUS-approved markets, invoicing and payment wаs to be in accordance with RUS regulations, however the MSA included a provision that Open Range “shall not be required to remit amounts to [vendors] until thirty (30) days following receipt of such funds by [Open Range] and from RUS.”7 See Compl. Ex. C. at 5.
Invoicing and payment in Non-RUS Markets was to follow a different procedure than
d. Vendor concerns following suspension of RUS advances to Open Range
Open Range began to experience cash-flow difficulties following the June 2, 2010 suspension of RUS loan advances to Open Range. The suspension was due to the Federal Communications Commission‘s (“FCC“) decision to suspend the spectrum permit of Globalstar—the company through which Open Range had been licensing the spectrum rights necessary to operate its network. As noted above, Open Range‘s loss of spectrum entitled RUS to cease making advances on the loan. On July 14, 2010, RUS provided Open Range with notice of its intent to terminate any remaining, unadvanced funds on the loan if Open Range failed to obtain an alternate agreement to gain access to spectrum rights. See Def.‘s Suppl. Mem. App. at A208.
By September 15, 2010 (if not earlier), Jonathan Adelstein, the Administrator of the RUS, received an e-mail indicating that Open Range‘s vendors were seeking immediate payment of past-due bills from Open Range. See Pl.‘s Suppl. Resp. App. at A317. On September 22, 2010, the FCC issued a temporary permit to Open Range that allowed Open Range access to spectrum until January 31, 2011. See Def.‘s. Suppl. Mem. App. at A206-07. This permit, however, only covered 264 “Approved Communities.” Id. As such, the maximum number of communities that Open Range could serve under the Loan Agreement was reduced from the original 540 markets to 264 markets. Id.
Having secured access to at least some spectrum, an Open Range Executive Vice President contacted a Special Assistant to the Secretary of the United States Department of Agriculture on September 23, 2010, to ask when Open Range‘s funding requests would be fulfilled. Pl.‘s Suppl. Resp. App. at A396. The record contains evidence that Open Range informed RUS that Open Range‘s vendors were concerned about being paid and that Open Range was worried that these vendors might leave the project. Id. The Special Assistant responded by stating that Open Range could “expect the letter and simultaneous release of funds by the end of the day.” Id. at A395. With regard to the vendors, the Special Assistant stated that “I think at this point our team feels the letter will serve as the press release and we will continue to talk to anyone (vendors, press, etc) who we need to [in order to] help calm fears and rebuild credibility. Jonathan [Adelstein] can talk to whomever you‘d like in this regard.” Id.
In a letter dated that same day, RUS modified its July 14, 2010 letter. Specifically, RUS withdrew its 90-day notice of intent to terminate the Loan Agreement, but left the suspension of funds in place with respect to certain communities that no longer had access to spectrum (i.e., those outside of the 264 “approved communities“). See Def.‘s Suppl. Mem. App. at A206-08. RUS authorized the immediate release of $14 million (for work done in June and July), and a future release of $5 million (for work done in July and August) upon receipt of a request from Open Range. See id.; Pl.‘s Suppl. Resp. App. at A392. RUS stated that it would only consider advance requests for approved communities, and that no funds would be provided for conversion from Globalstar spectrum to any alternative. See Def.‘s Suppl. Mem. App. at A206-08.
On October 4, 2010, the Mr. Adelstein was copied on an email sent by Open Range to the Director of the RUS Broadband Division, Ken Kuchno, which stated that Open Range
On October 8, 2010, Mr. Adelstein sent a letter to Open Range approving a revised business plan that would provide support to the 264 communities covered by the FCC‘s temporary permit. The letter stated that RUS “is modifying the funding restrictions . . . to include any construction identified in the Build-Out Plan approved on October 8, 2010, for the period of July 1, 2010, to December 31, 2010.” Pl.‘s Suppl. Resp. App. at A398. On that same day, Mr. Kuchno also sent a letter to Open Range, which stated that RUS was “approving the Build-Out Plan for the period of July 1, 2010 to December 31, 2010, that covers the deployment of 228 markets, of which 212 will be funded with RUS funds and the remaining 16 with non RUS funds.” Pl.‘s Suppl. Resp. App. at A399.
e. Subsequent requests for funds to pay continuing vendor arrearages
Notwithstanding the October 8 letters, RUS continued to withhold funding advances to Open Range through at least March 2011. See Def.‘s Suppl. Mem. App. A94-99. According to Mr. Kuchno, the decision to suspend advances was approved by Mr. Adelstein. Id.
On January 11, 2011, Open Range e-mailed Mr. Kuchno (and copied Mr. Adelstein) seeking approval of two contracts: one held by another vendor, Alvarion, and the other held by G4S. Open Range requested that the G4S contract, which RUS had allegedly rejected on December 2, 2010, be approved (i.e., funded) because (1) RUS had provided verbal approval before the end of the year; (2) the funding for the specified markets had already been approved under the July through December 2010 six-month plan; and (3) the contracts had purportedly been “circulating through RUS for several months.” See Pl.‘s Suppl. Resp. App. at A321. The next day, Mr. Adelstein wrote to Mr. Kuchno about setting up a meeting to respond to Open Range. See Pl.‘s Suppl. Resp. App. at A319 (“Why wait until Wednesday? They seem to be concerned about getting paid now. I get there are issues, but can‘t we get to the bottom of it sooner?“).
On March 11, 2011, Open Range sent a Weekly Status Report to RUS that indicated, among other things, that Open Range‘s arrearages to its vendors represented a risk to deploying the broadband network. Included in the status report was a list of monies owed to Open Range in order to pay vendor contracts. With regard to G4S, the report listed as follows:
[G4S]: [$]2,600,000 [G4S] Contract C-9—$200k needs to be drawn down from the current contract. However, the contract needs to be amended to increase the value by approximately $250K to cover site acquisition pass through expenses. However, there may be more required on this contract once site acquisition is completed for various sites on this contract. Pl.‘s Suppl. Resp. App. at A170.
f. April 29, 2011 Loan Amendment, Equity Commitment Letter, and Shareholder Agreement
On April 29, 2011, RUS and Open Range executed an amendment to the Loan Agreement (“Loan Amendment“) in which they agreed to reduce the loan amount from $269,298,000 to $180,000,000 to reflect a network size of only 160 markets, rather than the original 540 markets. As a condition precedent to advancing additional funds, the Loan Amendment required receipt of a letter from OEP to Open Range in which OEP committed to provide up to an additional $40,000,000 of equity capital. See Compl. Ex. B at 9.
Also on April 29, 2011, Open Range Holding Company (the shareholder of Open Range) and OEP executed an “Equity Commitment Letter.” This letter obligated OEP
Also on April 29, 2011, Open Range Holding and RUS entered into a “Shareholder Agreement.” This agreement provided, among other things, that “[s]ubject to the terms and conditions of the Equity Commitment Letter . . . [OEP Holdings] shall from time to time purchase equity in the Borrower [Open Range] in an amount equal to $40,000,000 in the aggregate, at such times and in such amounts such that the Borrower would always have unrestricted cash and cash equivalents on its consolidated balance sheet sufficient to fund the following six weeks of operating expenses as reasonably determined by the Company.” See 2d. Am. Compl. Ex. D.
After the Loan Amendment, Equity Commitment Letter, and Shareholder Agreement were executed, RUS funded the advances listed in Schedules B-1 and B-2. It is undisputed that G4S received the $2.7 million identified on Schedule B-1. However, an audit report prepared by a consultant to Open Range in September 2011 indicates that Open Range had not closed out its contracts with vendors, and that additional amounts were owed to G4S and other vendors at that time. See Pl.‘s Suppl. Resp. App. at A332.
Open Range filed for bankruptcy on October 6, 2011. See In re Open Range Commc‘ns, Inc., Bk. No. 11-13188, 2013 WL 542471, at *1 (Bankr.D.Del. Feb. 12, 2013). On that date, Open Range held, among other assets, a deposit account with a balance of $4.9 million. Id. The $4.9 million in funds were subsequently moved to an escrow account. Velocitel, Inc., another Open Range vendor, filed an adversary proceeding against the appointed trustee and the United States seeking a declaration regarding its rights to the escrow account. The trustee filed an answer and a third party complaint seeking a declaration that the escrow account was property of the estate. As a result, other parties, including G4S, were addеd as third-party defendants. G4S, in turn, filed an answer, counterclaims, and cross-claims against various parties, including RUS. Although most of the parties reached a settlement resolving most of the disputes, the settlement did not resolve the causes of action or claims that G4S had asserted against RUS and the trustee, among others. The Bankruptcy Court ultimately dismissed G4S‘s cross-claims. Id. at *5.9
g. Procedural history
Plaintiff filed its initial complaint on January 3, 2012, and an amended complaint on January 24, 2012. The Government moved to dismiss on March 5, 2012. Plaintiff filed a second amended complaint, which was deemed filed on May 31, 2012. The government moved to dismiss the second amended complaint under
II. DISCUSSION
As noted above, the government has moved to dismiss plaintiff‘s second amended complaint under Rules
It is well established that when the facts that convey subject-matter jurisdiction are intertwined with those that determine the merits, the court may deny the
Here, G4S‘s contention that it was an intended third-party beneficiary of the Loan Agreеment between RUS and Open Range goes to the heart of both the court‘s jurisdiction under the Tucker Act and the merits of plaintiff‘s claim, rendering resolution of the dispute under
a. Standard of review for Rule 56 motions for summary judgment
Summary judgment is appropriate “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”
b. Positions of the parties
Plaintiff contends that the Loan Agreement between RUS and Open Range demonstrated their intent to directly benefit Open Range‘s vendors by compensating them for work performed in constructing the broadband network. Plaintiff argues that intent can be inferred from the following facts: (1) the stated purpose of the Loan Agreement, which was to financе RUS-approved construction, could only be effectuated by using loan proceeds to pay vendors; (2) Open Range‘s submission—and RUS‘s approval—of build-out plans every six months that unambiguously indicated that third-party vendors would perform construction work; (3) RUS‘s review, editing, and approval of the MSA between Open Range and G4S; (4) RUS‘s review of vendor invoices as part of the loan advance process; (5) RUS‘s requirement that Open Range establish a pledged deposit account from which funds could only be withdrawn as agreed to by RUS; (6) RUS‘s and Open Range‘s communication about the vendors’ progress and concerns in constructing the broadband network, including that some vendors had threatened to stop work if they were not paid; (7) Schedules B-1 and B-2 of the Equity Commitment Letter, which obligated RUS to advance specific funds to pay for specific vendor work performed under sрecific vendor contracts; and (8) RUS‘s audits of the deposit account to ensure that loan funds were disbursed according to RUS‘s intent and the terms of the contract.
In response, the government argues that these facts are not sufficient to show that RUS intended to confer a benefit directly on G4S, such that G4S is entitled to sue the United States for payment. According to the government, the only “intended beneficiaries” of the Loan Agreement were the residents of the rural communities within RUS-approved markets. Because RUS never committed to pay—and never in fact paid—any of Open Range‘s vendors directly, the government views G4S as only an “incidental beneficiary” of the Loan Agreement. The government asserts that G4S‘s status as an incidental beneficiary is unaffected by RUS‘s review of vendor progress reports and payment requests or its knowledge that Open Range would use the loan advances in order to pay its vendors.
c. The legal standard for third-party beneficiary status
Traditionally, a third party could not sue on a contract to which it was not a party. See 13 Williston on Contracts § 37:1 (4th ed.2013). Over time, however, courts began to recognize a limited exception in instances “when a promisor agrees with a promisee to render a performance to a third party instead of to the promisee. . . .” Id.; see also Restatement (Second) of Contracts § 302 (1981).11 Nevertheless, it remains the general rule that a subcontractor that agrees to supply materials or labor to a general contractor is only an incidental beneficiary of any contract between the general contractor and its ultimate client. See 9 Corbin on Contracts § 45.3 (rev. ed. 2007); Restatement (Second) of Contracts § 302 cmt. e., illus. 19; accord BIS Computer Solutions, Inc. v. City of Richmond, 122 Fed.Appx. 608, 610, 612 (4th Cir.2005) (finding subcontractor was not an intended third-party beneficiary under Virginia law despite being named in prime contract and contract provision prohibiting subcontractor‘s removal without the government‘s approval). Thus, this narrow exception applies only when the contracting parties demonstrate their intent to confer a direct benefit on a third party. See Restate-
B promises A to pay whatever debts A may incur in a certain undertaking. A incurs in the undertaking debts to C, D and E. If the promise is interpreted as a promise that B will pay C, D and E, they are intended beneficiaries . . . [but] if the money is to be paid to A in order that he may be provided with money to pay C, D and E, they are at most incidental beneficiaries. Id. § 302, cmt. b, illus. 3.12
In applying these general principles, the court‘s task is to distinguish between prime contracts that create “intended beneficiaries,” which establish a duty in the government to the third-party vendor, and contracts that merely сreate “incidental beneficiaries,” which do not establish any such obligation. See Restatement (Second) of Contracts § 304. In conducting this analysis, the court looks first to the language of the prime contract, and then to other objective evidence. See Flexfab, 424 F.3d at 1262. Although the express naming of a third party “greatly facilitates a determination that the promisor and promisee intended to confer enforceable rights on the named party,” 9 Corbin on Contracts § 44.8, the prime contract‘s express identification of a subcontractor is neither necessary nor sufficient to demonstrate the requisite intent, see Flexfab, 424 F.3d at 1260; 9 Corbin on Contracts § 44.8; Restatement (Second) of Contracts § 308 cmt. a; see also Montana v. United States, 124 F.3d 1269, 1273 (Fed.Cir.1997) (plaintiff must “fall within a class clearly intended to be benefited thereby“).
Where a subcontractor seeks recognition as an intended beneficiary of a federal contract, it is possible to infer the requisite intent on the part of the government “from the actions of the contracting officer and circumstances providing the contracting officer with appropriate notice that the contract provision at issue was intended to benefit the third party.” Flexfab, 424 F.3d at 1262.
Notwithstanding this theoretical possibility, it is extremely difficult to establish status as an intended third-party beneficiary by inference in the context of a government contract. See, e.g., id. at 1263-65 (declining to infer contracting officer‘s knowledge or intent based on actions of other contracting personnel); US Ecology, Inc. v. United States, 245 F.3d 1352, 1356 (Fed.Cir.2001) (holding government‘s cooperation with third-party insufficient to establish third-party beneficiary status); O. Ahlborg & Sons, Inc. v. United States, 74 Fed.Cl. 178, 189-90 (2006) (holding government‘s involvement in negotiating subcontracts and program oversight insufficient to establish contractual privity with subcontractor); JGB Enters., Inc. v. United States, 63 Fed.Cl. 319, 334 (2004) (declining to infer contracting officer‘s knowledge or intent based on actions of other contracting personnel). Indeed, because waivers of sovereign immunity are construed narrowly, the right to sue the government on a contract to which one is not a party constitutes an “exceptional privilege.” Glass v. United States, 258 F.3d 1349, 1354 (Fed.Cir.2001) (quoting German Alliance Ins. Co. v. Home Water Supply Co., 226 U.S. 220, 230, 33 S.Ct. 32, 57 L.Ed. 195 (1912)). The standards to be applied in this circuit for determining whether a subcontractor can claim status as an intended third-party beneficiary are laid out in the following cases: D & H Distrib. Co. v. United States, 102 F.3d 542 (Fed.Cir.1996); Flexfab, 424 F.3d 1254; and JGB, 63 Fed.Cl. 319, aff‘d, 497 F.3d 1259 (Fed.Cir.2007).
In D & H, a prime contractor (“CIM“) failed to pay the plaintiff (“D & H“), its subcontractor, for materials plaintiff had furnished to the National Security Agency (“NSA“) on CIM‘s behalf. See D & H, 102 F.3d at 544. Although initially reluctant to subcontract to CIM, D & H agreed after the NSA amended the prime contract to assign payment to CIM and D & H jointly. Notwithstanding this modification, after D & H rendered performance the NSA issued a check in CIM‘s name only. CIM later be-
The entire purpose of the joint payment clause was to provide protection for D & H by giving it a right to control the disbursement of the contract proceeds and thereby to ensure that its invoice to CIM would be paid. The rights conferred on D & H were designed to effectuate the payment of CIM‘s debt to D & H, which would arise upon CIM‘s execution of the contract. D & H, 102 F.3d at 547 (emphasis added).
Thus, the court adopted a rule that a subcontractor is entitled to enforce a contract where the subcontractor is made a joint-payee of the prime contract. Id.
In Flexfab, the Federal Circuit again addressed the right of a subcontractor to sue the federal government directly after a prime contractor failed to pay the subcontractor. In that case, the Defense Logistics Agency, Defense Supply Center Columbus (“DSCC“) awarded a contract to Capital City to supply various materials to the Defense Department. Flexfab, 424 F.3d at 1257. Despite initial reluctance, Flexfab еventually agreed to subcontract to Capital City after various DSCC officials promised to amend the prime contract to provide for direct payment to Flexfab‘s escrow account. Id. Notwithstanding this agreement, payment was rendered to Capital City, which subsequently became insolvent without having satisfied its debts Flexfab. Id. at 1258. Flexfab brought suit against the federal government alleging, inter alia, that Flexfab was an intended third-party beneficiary of the contract amendment.
The Federal Circuit concluded that Flexfab had failed to show that the relevant DSCC contracting officer intended to convey a benefit on Flexfab, and thus denied recovery. Id. at 1262-63 (“Though . . . the modification of a remittance clause to give a subcontractor control over payments from the government qualifies the subcontractor as an intended third-party beneficiary, that rule of law is subject to the principle that only those with authority to contract on the government‘s behalf can exhibit the necessary intent to give the subcontractor such control.“). The court thus made clear that the government‘s ratification of a contract provision that expressly provides for direct payment to a subcontractor remains unenforceable by the subcontractor, absent evidence of such intent of an authorized government official. See id.
JGB involved non-payment by the same prime contractor in Flexfab, but a different subcontractor (“JGB“). JGB, 63 Fed.Cl. 319, 323 (2004). Unlike the plaintiff in Flexfab, however, JGB directly contacted the DSCC contracting officer in order to obtain assistance concerning Capital City‘s arrearages. Id. Following a series of communications between JGB and DSCC officials, JGB threatened to cease performance unless the situation was addressed. The DSCC contracting officer subsequently threatened Capital City with debarment if the situation was not resolved. Id. at 324. Ultimately, the DSCC contrаcting officer agreed to amend the prime contract to allow for direct payment to an escrow account designated by the prime contractor, which in actuality was JGB‘s bank. See JGB, 497 F.3d at 1260. Notwithstanding this agreement, the government mailed payment to Capital City. JGB, 63 Fed.Cl. at 329. Moreover, the payment reflected a deduction due to monies owed by Capital City on an unrelated contract with the government. Id. Capital City became insolvent without having satisfied its debt to JGB. Despite the fact that JGB was not listed by name as a joint-payee, the court concluded that because the DSCC contracting officer understood that the purpose of amending the payment procedure was to set aside monies for JGB, JGB became an intended third-party beneficiary of Capital City‘s contract with the government. Id. at 334.
d. Tested by the aforementioned standards, plaintiff cannot show that G4S was an intended third-party beneficiary
The court gleans from these cases that in order for a subcontractor to obtain the status of an intended third-party beneficiary, it must provide clear evidence that an authorized government official approved a
To begin, nothing in the plain language of the Loan Agreement indicates that RUS intended to assume any obligation to ensure that Open Range‘s vendors received, directly or jointly with Open Range, any payment from RUS. Rather, the Loan Agreement explains how, and for what purpose, RUS would disburse funds to Open Range‘s dеposit account. Similarly, plaintiff has not identified any provision of the Loan Amendment, Equity Commitment Letter (including Schedule B-1), or Shareholder Agreement in which RUS unambiguously agreed to modify the loan advance process for the express purpose of effectuating payment directly to Open Range‘s vendors. Notably, none of these agreements gave Open Range‘s vendors control over the pledged deposit account, re-
quired RUS to advance any portion of the loan proceeds directly to any of Open Range‘s vendors, or required RUS to advance a portion of the loan proceeds to an escrow-account controlled by any of Open Range‘s vendors. At most, these agreements provided RUS with additional notice of Open Range‘s outstanding obligations to its vendors.
Even granting plaintiff the inference that authorized RUS officials were concerned that Open Range‘s vendors might stop working if arrearages weren‘t addressed, the record is devoid of evidence that an authorized RUS official intended to do anything but pay Open Range so that Open Range had sufficient funds to carry out its plan of constructing a rural broadband network. RUS‘s close oversight of Open Range, awareness of Open Range‘s arrearages, and willingness to advance loan funds to Open Range, taken individually or in combination, are insufficient to demonstrate that RUS approved the Loan Amendment for the express purpose of directly or jointly paying Open Range‘s vendors. In this connection, plaintiff‘s contention that G4S is similarly situated to the plaintiff in JGB rings hollow. Unlike Mr. Adelstein and Mr. Kuchno, the contracting officer in JGB took specific actions to modify the prime contract‘s payment mechanism for the exprеss purpose of ensuring that JGB received payment from the government.14 See JGB, 497 F.3d at 1260-61. Thus, in contrast to JGB, G4S fits squarely within the category of indirect beneficiaries identified in Restatement (Second) of Contracts § 302, cmt. b., illus. 3 (if money is paid to the prime contractor in order to ensure the prime contractor has money to pay subcontractors, the subcontractors are at most incidental beneficiaries). As such, plaintiff has failed to establish that G4S was an intended third-party
For the court to hold otherwise would transform the “exceptional privilege” of status as an intended third-party beneficiary into a broad right of subcontractors to sue the federal government in any case where the contracting officer closely oversees the prime contractor‘s work with its subcontractors, or whenever an agency pays a prime contractor with the knowledge that some of that payment would be used to compensate subcontractors. Such an expansion of an otherwise narrow exception to the requirement that a plaintiff be in privity with the government would undermine the traditional relationship between contracting officers and prime contractors, as well as between prime contractors and their subcontractors. Therefore, without clear evidence that an authorized government official approved a contract provision for the express purpose of effectuating payment from the government to the vendor, subcontractors remain merely incidental beneficiaries. Because G4S has failed to make this showing, the court is compelled to GRANT the government‘s motion for summary judgment.16
III. CONCLUSION
Based on the foregoing discussion, the court concludes that G4S has failed to establish a genuine dispute as tо whether G4S was a third-party beneficiary of the Loan Agreement between RUS and Open Range. Therefore, the Government‘s Motion for Summary Judgment is GRANTED. The clerk is directed to enter judgment accordingly. Each party to bear its own costs.
IT IS SO ORDERED.