Lead Opinion
Linan-Faye Construction Company Co., Inc. (“Linan-Faye”), a public housing contractor, appeals from orders of the district court that granted summary judgment for the Housing Authority of the City of Camden (“HACC”) on Linan-Faye’s claims under public contract law and 42 U.S.C. § 1983. Because the district court erred in applying federal common law rather than state law to resolve this dispute, we will reverse and remand to the district court for further proceedings. Nevertheless, since we conclude that in the absence of New Jersey law which specifically interprets “termination for convenience” clauses New Jersey courts would look to federal common law for guidance, we will limit the triable issues on remand to a determination of: (1) the definition of “work performed” for purposes of paragraph 17 of Linan-Faye’s contract with HACC; (2) the pre-termination expenses incurred by Linan-Faye that may be compensable as “work performed” under paragraph 17 of the contract; and (3) HACC’s liability, if any, for damages resulting from HACC’s withholding of Linan-Faye’s performance bond after termination. Finally, because the district court did not err in determining that Linan-Faye failed to demonstrate a protectible property or liberty interest sufficient to support its § 1983 claim, we will affirm the district court’s grant of summary judgment on this claim.
I. FACTS & PROCEDURAL HISTORY
On August 11, 1988, HACC advertised for bids on a housing modernization project. The project involved the renovation and rehabilitation of 244 housing units and was to be funded in substantial part by a grant from the United States Department of Housing and Urban Development pursuant to the Public and Indian Housing Comprehensive Improvement Assistance Program (“CIAP”). Plaintiff, Linan-Faye, attended all required pre-bid meetings and submitted a bid of $4,264,000, together with supporting documentation which included a bid bond, performance bond, qualification statement, and required affidavits. Linan-Faye was the lowest responsible bidder for the job, underbidding its nearest competitor by $600,000. Accordingly, HACC informed Linan-Faye that the contract was to be forthcoming.
Linan-Faye engaged in preparatory activities in connection with the contract, including meeting with prospective subcontractors, job planning and pricing, talking with relevant inspectors, and seeming insurance. Also, on several occasions, representatives of Linan-Faye met with HACC and its architect to discuss specifications and make preparations for the commencement of physical construction. Linan-Faye, however, never began physical construction because numerous disputes broke out between the parties over interpretation of the specifications.
Linan-Faye contends that HACC demanded concessions before permitting work to begin. HACC maintains that the parties arrived at different interpretations of the project plans and specifications, and this conflict became evident at pre-construction meetings. On November 29, 1988, as the result of these disputes, HACC advised Li-nan-Faye that it was going to rebid the project. Linan-Faye filed suit to enjoin this rebidding and allow it to complete the project as bid.
The district court entered a temporary restraining order to prevent HACC from accepting further bids. Subsequently, the court approved a Stipulation of Settlement and Order of Dismissal with Prejudice, under which the parties agreed to execute the contract and proceed with the project as originally. planned. Nevertheless, disputes soon broke out again.
On November 22, 1989, HACC issued a Notice to Proceed. Linan-Faye contends that the notice was limited to an order to correct certain plumbing problems that were a portion of the original contract. Linan-Faye refused to proceed in a piecemeal fashion, and insisted that it would not begin work until a certain number of vacant buildings were available at the same time so that it could achieve economies of scale. HACC responded that it had scattered vacant units available, but not rows of units.
At a preconstruction meeting on September 6, 1990, Linan-Faye informed HACC that it would not start work until the contract price was increased to reflect the costs incurred by the delay in commencing construction. HACC responded that Linan-Faye had to begin work before it would address the issue of the price increase.
HACC elected to terminate Linan-Faye’s contract by letter dated September 25, 1990. In that letter, Gregory Kern, the Interim Executive Director of HACC, stated that HACC would instruct the Modernization Office to assist Linan-Faye in reclaiming its performance bond. While the letter did not mention the terms “breach” or “default,” it did state that Linan-Faye “had continually failed to demonstrate its intent to perform under the public contract.” Letter from Kern to Norman Faye (September 25, 1990); App.Vol. I at 114 — 115. HACC confirmed its decision to terminate by letter dated October 23, 1990.
Linan-Faye objected to the termination and filed the instant action on October 26, 1990, setting forth theories of recovery under New Jersey public contracts law and 42 U.S.C. § 1983. Linan-Faye served HACC with a complaint in December of 1990 seeking specific performance and damages. HACC did not surrender Linan-Faye’s performance bond until July of 1991, after the district court determined that specific performance was not available to Linan-Faye.
In April of 1992, HACC filed a motion for summary judgment on Linan-Faye’s civil rights claim and for the first time argued, in that same motion, that the “termination for convenience” clause set forth in paragraph 17 of the General Conditions of their contract limited Linan-Faye’s damages under the contract.
Upon a renewed motion for summary judgment, the district court held for HACC, determining that Linan-Faye’s damages would be limited to those compensable under the contract’s termination for convenience clause. The district court left open, however, the possibility of recovery for damages accruing from HACC’s initial failure to identify specifically the termination as one of convenience.
HACC filed its third motion for summary judgment on October 27, 1993. In that motion, HACC contended that since Linan-Faye never began work under the contract, it could not recover any damages under the termination for convenience clause. Linan-Faye responded that it could recover damages for: (1) preparatory costs such as soliciting subcontractors, pricing, and pre-construction meetings; (2) improper notice of termination; (3) pre-termination delay by HACC; and (4) HACC’s refusal to relinquish Linan-Faye’s performance bond. Determin
Following oral argument before this Court, HACC and Linan-Faye agreed to participate in non-binding mediation of the controversy before the Honorable Max Rosenn, Senior Circuit Judge. By memorandum dated November 9, 1994, Judge Rosenn informed us that efforts to reach' a settlement of the controversy through mediation were unsuccessful.
II. JURISDICTION & OVERVIEW OF ISSUES RAISED IN THIS APPEAL
The district court exercised jurisdiction in this matter by virtue of the diversity of citizenship of the parties with the requisite amount in controversy pursuant to 28 U.S.C. § 1332 (1988). This Court has jurisdiction pursuant to 28 U.S.C. § 1291 (1988). Linan-Faye essentially raises six issues on appeal:
III. CHOICE OF LAW
Linan-Faye contends that the district court erred in applying federal common law and not the law of New Jersey to resolve this dispute. According to Linan-Faye, this action involves a contract dispute between a private contractor and an autonomous public housing authority created pursuant to New Jersey law. Where such parties enter federal court based upon diversity of citizenship, Linan-Faye argues, the federal courts presumptively apply state law. See Erie R. Co. v. Tompkins,
Our review of a district court’s determination as to choice of law is plenary. Louis W. Epstein Family Partnership v. Kmart Corp.,
Similar to Coastal General, in the instant case a public housing authority contracted with a private construction company. Li-
The district court erred in deviating from the generally applicable Erie doctrine. The Supreme Court, in Boyle v. United Technologies Corp.,
Relying on American Pipe & Steel Corp. v. Firestone Tire & Rubber Co.,
Moreover, the district court erred in finding a conflict between federal and state law that would endanger any federal interest involved. The district court correctly recognized the proposition that a lawsuit which involves a federal interest is a “necessary, not a sufficient, condition for the displacement of state law.” Linan-Faye Construction Co.,
*921 We find it implausible that the federal government would require all CIAP contracts in excess of $10,000.00 to contain a termination for convenience clause, and then leave interpretation of that clause to the vagaries of state law, particularly where, like New Jersey, there are few or no state law cases interpreting this type of provision. Rather, we believe that the decision to include a termination for convenience clause in the “Uniform Requirements” section of the C.F.R. reflects a federal interest in a consistent interpretation of that clause.
Id.
The first sentence of this paragraph merely assumes the answer to the question the court is wrestling with: whether Congress left interpretation of clauses in these types of contracts to state law. The second sentence of the above quoted paragraph simply reid-entifies the interest involved, it does not point out a conflict with state law.
The problem with the district court’s reasoning is highlighted by its own analysis of what the outcome would be under state law. The court states, “[e]ven assuming that New Jersey law were to apply, we have no basis for believing that New Jersey courts would look elsewhere than to federal common law for guidance.” Id. If New Jersey courts, as is likely, would look to federal common law to decide this question for which there is little state law precedent on point, then the court is incorrect in its assertion that a conflict exists. The outcome would be the same under both federal and state common law. Thus, the court erred in applying federal common law and not the law of New Jersey to resolve this dispute and we must reverse with the direction that the district court resolve all remaining issues in accordance with New Jersey law.
IV. NEW JERSEY LAW
Having decided that it is the law of New Jersey that governs the interpretation of this contract, we must now decide whether Linan-Faye is correct when it argues that the general principles of contract damages under New Jersey law would permit Linan-Faye to recover full expectation damages under this contract rather than those damages provided for under the contract’s termination for convenience clause. Citing A-S Development, Inc. v. W.R. Grace Land Corp.,
It is undisputed that there are no cases in New Jersey construing the' effect of termination for convenience clauses. It is also
V. TERMINATION FOR CONVENIENCE
Because the New Jersey Supreme Court would likely look to federal common law as persuasive authority in order to construe this contract’s termination for convenience clause, we must examine the parties’ contentions in light of the relevant federal case law.
HACC’s letter of September 25, 1990 is replete with references to defaults on the part of Linan-Faye. HACC stated in the letter that Linan-Faye’s correspondence evidences Linan-Faye’s “intent to avoid compliance with the specifications.” Letter from HACC to Norman Faye (September 25, 1990); App.Vol. I at 114. Further, HACC stated in its letter that Linan-Faye had “continually failed to demonstrate its intent to perform under the public contract” and that “it is clear” Linan-Faye is “no closer to performing its contract obligations then it was in September of 1988.” Id. at 114, 115. Nowhere in this letter does HACC state that it is terminating Linan-Faye simply for convenience. It is apparent from this document that HACC originally terminated Linan-Faye for default.
Given HACC’s original termination of Li-nan-Faye for default, the question that we must reach is whether the court should retroactively convert this termination for default into a termination for convenience. HACC
The absence of a conversion provision in regulations concerning CIAP grants does not preclude application of federal common law. While the FAR’s have an explicit conversion clause, it was the federal common law that originally developed the concept of termination for convenience, and later developed the concept of constructive termination for convenience. We find it appropriate to apply federal common law.
The idea that the government can, under certain circumstances, terminate a contract without paying full expectation damages, dates from the winding down of military procurement following the civil war. Torncello v. United States,
Constructive termination for convenience, an outgrowth of termination for convenience, is a judge-made doctrine that allows an actual breach by the government to be retroactively justified.
*923 A party to a contract who is sued for its breach may ordinarily defend on the ground that there existed, at the time, a legal excuse for nonperformance by him, although he was then ignorant of the fact. He may, likewise, justify an asserted termination, rescission, or repudiation, of a contract by proving that there was, at the time, an adequate cause, although it did not become known to him until later.
Perhaps the high-water mark of courts’ permissiveness in allowing the government to terminate for convenience, constructively or otherwise, was Colonial Metals Co. v. United States,
Termination for convenience, and its expansion into the constructive termination for convenience doctrine, however, does not confer upon the government a discretion that is unbounded. In granting the government the privilege of constructive termination for convenience, courts brush up against the problem of allowing the government to create an illusory contract. See Torncello,
In this matter, the district court concluded that under the bad faith test it was proper to allow HACC to invoke the doctrine of constructive termination for convenience. Additionally, the district court commented that even under the changed circumstances test of Tomcello, the deterioration in the relationship between HACC and Linan-Faye would constitute sufficiently changed circumstances
In Torncello, the government awarded a private contractor the right to service all of the Navy’s pest control needs. Torncello,
In the matter at hand, Linan-Faye does not claim that HACC terminated its contract to obtain the work at a cheaper price. Li-nan-Faye also does not claim that HACC terminated the contract in order to obtain work from a lower bidder who was known to HACC at the time it contracted with Linan-Faye. Indeed, Linan-Faye points out in its brief that it was the low bidder for the project. Brief of Linan-Faye at 1. Thus, the divisive facts presented in Torncello are not present here.
Moreover, subsequent eases have limited the scope of Torncello. The Court of Appeals for the Federal Circuit, for example, has stated that Torncello “stands for the unremarkable proposition that when the government contracts with a party knowing full well that it will not honor the contract, it cannot avoid a breach claim by adverting to the convenience termination clause.” Salsbury Industries v. United States,
As the district court recognized, the post award deterioration of the relationship between HACC and Linan-Faye which included conflict over the specifications would likely constitute sufficiently changed circumstances to justify'application of the doctrine of constructive termination for convenience even under the reasoning in Torncello. See Embrey v. United States,
VI. COMPENSATION IN LIGHT OF THE TERMINATION FOR CONVENIENCE CLAUSE
Having determined that the termination for convenience clause is applicable in this case, we must next decide whether the district court erred in granting summary judgment for HACC and denying Linan-Faye all compensation'. Linan-Faye contends that the district court exceeded its role at the summary judgment stage because there still remain six contested issues concerning its contract claim. According to Linan-Faye, the district court erred in determining: (1) the definition of “work performed” under the contract; (2) there was no evidence of com-pensable pre-termination expenses under the contract; (3) the reason why HACC retained Linan-Faye’s performance bond; (4) that Li-nan-Faye “refused” to begin work; (5) that Linan-Faye misunderstood the contract specifications; and (6) that there was proper HUD approval of the contract’s termination.
Our scope of review is plenary in determining the propriety of summary judgment. Oritani Savings & Loan Ass’n v. Fidelity & Deposit Co.,
ee of the issues that Linan-Faye raises are genuine issues of material fact in dispute. The other issues concern facts that are either not material, or are not in dispute. We will reverse the decision of the district court granting summary judgment on those issues where there is a genuine issue of material fact in dispute.
A. Definition of ‘Work Performed” under the Contract
Linan-Faye argues that the trial court improperly selected isolated phrases from correspondence between the parties in its determination that the phrase “work performed” in paragraph 17 of the contract
Paragraph 8(a) of the General Conditions of this contract is the paragraph from which the district court draws the most support for its conclusion that “work” under the termination for convenience clause does not include “preparatory work.” The court’s reading of this paragraph, however, is too strained to support a grant of summary judgment. Paragraph 8(a) of the General Conditions states:
Progress payments will be made at approximately thirty (30) day intervals; and in preparing estimates, acceptable work in place, material delivered to and properly stored on the site, and preparatory work done will be taken into consideration. If the contract covers more than one project, a separate estimate shall be furnished for each.
App.Vol. II at 42. From this paragraph, the district court deduced that expenses for preparatory work were recoverable only if the contractor begins the physical construction required under the contract. Linan-Faye Construction Co., 847 F.Supp. at 1207. This conclusion is unjustified.
There is nothing in the language of paragraph 8(a) that speaks to situations where HACC terminates Linan-Faye for convenience after Linan-Faye has performed preparatory work, but before it has begun physical construction. If anything, the language of this paragraph demonstrates that both parties considered preparatory work to be a compensable cost because the paragraph states that preparatory work will be taken into consideration in preparing estimates for compensation. Thus, the district court erred in concluding that this paragraph is dispositive.
The district court’s survey of numerous other paragraphs containing the word “work” also produces inconclusive results. According to the court, paragraph 2 which requires the contractor to “furnish all necessary labor, materials, tools, equipment, water, light, heat, power, transportation, and supervision necessary for performance of the work,” and paragraph 22 which allows the contractor to request from the architect drawings “which will [be required] in the planning and production of the work” somehow indicate that “work performed” under paragraph 17 does not include preparatory work. Id. at 1206 (emphasis added). These provisions, on their face, do not appear to support any such conclusion. In addition, the district court determined that paragraphs 26, 29 and 35, which refer to the contractor’s obligation to protect “work completed to date” and to the warranty as to “work done,” support the conclusion that work performed under the termination for convenience clause does not include preparatory work. Once again, if anything, these provisions merely beg the question of how to define “work” under paragraph 17 of the contract. Finally, the court
Linan-Faye asks for the opportunity to present testimony and cross-examine witnesses concerning the intent of the parties in using the phrase “work performed” in paragraph 17 of the contract. Based on the evidence mustered by the district court, we cannot conclude that there is no dispute as to this issue. Further, this issue is material to the question of what constitutes proper compensation under paragraph 17. Therefore, Linan-Faye should be allowed to present the evidence that it feels is appropriate to determine the intent of the parties. Accordingly, we hold that the district court erred in granting summary judgment for HACC ón this disputed issue.
B. Evidence of Pre-Termination Expenses
Related to the disputed issue of the definition of “work performed” under the contract is the issue of whether Linan-Faye produced any evidence of pre-termination expenses compensable as “work performed.” The district court determined that LinanFaye “had presented no evidence of expenses that would merit an equitable adjustment to the contract.” Id. at 1208 n. 22. LinanFaye argues that the certification which it submitted in opposition to HACC’s third motion for summary judgment provides the requisite evidence. Linan-Faye is correct.
The district court, at this early stage of the litigation, improperly concluded that there was “no evidence” of expenses compensable under the termination for convenience clause. Linan-Faye described 15 types of expenses that Linan-Faye incurred preparing for work on the HACC contract. Certification of Norman Faye (October 21, 1993); App. at 231-33. While many of these “expenses” may not be compensable, some of the stated expenses, such as time spent “with municipal building, plumbing and electrical inspectors regarding job phasing, contract details, code requirements, and problem solving,” may be compensable if the parties so intended under the termination for convenience clause of the contract. Cf. ITI Defense Communications Division, Nos. 11858, 13439,
In remanding for trial on this issue, however, it is important to explain precisely the scope of our holding. We do not hold that Linan-Faye is entitled to pre-termination expenses that accrued as the result of any alleged pre-termination breaches of contract by HACC. As the district court correctly held, eases that have addressed the issue of pre-termination breaches have concluded that claims for such damages are subsumed in the termination for convenience clause. Linan-Faye Construction Co.,
C. Why HACC Retained Linanr-Faye’s Performance Bond
Linan-Faye next contends that the trial court improperly resolved a factual dispute as to why HACC retained Linan-Faye’s performance bonds after terminating Linan-Faye. According to Linan-Faye, it is entitled to damages arising from HACC’s failure to return this performance bond. Linan-Faye alleges that by retaining its bond, HACC prevented it from accepting other construction contracts and used the bond as an inducement to force Linan-Faye to accept an unreasonable resolution of this dispute. HACC argues that it retained Linan-Faye’s performance bond because Linan-Faye instituted a suit seeking specific performance and if Linan-Faye were successful, HACC would need Linan-Faye’s bond.
This issue is not resolved solely by reference to the termination for convenience clause because the events that give rise to this claim occurred after termination.
Unfortunately, there is no testimony or record evidence to support the conclusion that HACC engaged in the “logical response” posited by the district court. No one from HACC ever indicated that it was Linan-Faye’s suit for specific performance that prevented HACC from returning the bond. Counsel for HACC simply raised this argument when the case took on a litigation posture. This naked assertion by counsel, without record support, is not sufficient to warrant a grant of summary judgment.
The district court attempts to justify its decision to accept HACC’s argument by referring to the September 25, 1990 termination letter sent by Gregory Kern, the Interim Executive Director of HACC. Nevertheless, its reasoning is unpersuasive. According to the court, Mr. Kern’s letter which indicated that HACC would return the bonds was sent before Linan-Faye instituted suit. Linan-Faye,
Moreover, even taking HACC’s view of the timing of the relevant events, there was an unjustified gap of over one month between the time HACC terminated Linan-Faye and the time Linan-Faye served its complaint seeking specific performance. According to HACC, after it issued its September 25, 1990 letter of termination, Linan-Faye -sought reversal of HACC’s decision to terminate. HACC states that it sent a letter to Linan-Faye on October 23,1990 confirming its decision to terminate. Linan-Faye did not serve its complaint for specific performance until early in December of 1990, however, and the bond had not yet been returned. This unex-eused delay strengthens Linan-Faye’s argument that HACC did not decide to hold onto the performance bond as the result of the
D. Whether Linan-Faye “Refused” to Begin Work
Linan-Faye asserts that the district court improperly found it “refused” to begin work. According to Linan-Faye, it did not refuse to begin work, but merely wanted to agree on any changes that HACC desired before it began construction. Linan-Faye contends that there, is no basis in the record for the district court’s finding that it flatly refused to begin work.
We find that the question of whether Li-nan-Faye flatly refused to begin work is immaterial to this case. Whether Linan-Faye actually “refused” to begin work would be relevant if it was necessary to decide if Linan-Faye defaulted on its obligations. The district court, however, based its holding on the doctrine of constructive termination for convenience. Linan-Faye Construction Co.,
E. Whether Linawr-Faye Misunderstood the Specifications
Linan-Faye argues that the district court improperly concluded that it misunderstood the contract specifications because the court indicated in a footnote that “[a]t the very least, plaintiff misinterpreted the architect’s specifications” for the project. Linan-Faye Construction Co.,
Linan-Faye’s argument misinterprets the district court’s reasoning. The relevant statement the court made in this footnote is merely that there was discord between the parties over interpreting their agreement. The district court mentioned the discord to support its conclusion concerning the constructive termination for convenience doctrine. Whether Linan-Faye actually misunderstood the specifications, or whether it was
F. Whether HUD Approval was Necessary for Termination
Linan-Faye suggests that whether HUD approved a termination for convenience is a disputed issue that precludes summary judgment. It concedes that HACC obtained HUD’s general approval to terminate the contract, but argues that HUD never approved a termination for convenience. Li-nan-Faye contends that HUD approval of. a termination for convenience was a condition precedent to invoking that clause, and failure to obtain such approval precludes summary judgment. Linan-Faye does not succeed in raising a disputed material issue on this point.
For the purposes of deciding this case, the district court did not assume that HACC originally terminated for convenience. While there is a dispute as to whether the original letter of termination constituted a default termination or a termination for convenience, HACC prevails under the district court’s reasoning without having to prove that it obtained HUD approval of a termination for convenience. The court proceeded on a constructive termination for convenience theory. Linan-Faye does not dispute that HUD had approved HACC’s right to terminate generally. Thus, concerning the original termination, HACC fulfilled its obligations by informing HUD, and obtaining from HUD a general approval for the termination of the contract. Because HACC received general HUD approval to terminate, there is no bar to this court’s using the constructive termination for convenience doctrine to convert this into a termination for convenience by operation of law. Further, and most importantly, there is simply no dispute as to the material facts of what approval HACC obtained. Indeed, both parties concede that HACC obtained HUD approval to terminate generally, but did not obtain specific HUD approval of a termination for convenience. Therefore, this cannot be a disputed factual issue as Linan-Faye erroneously contends.
Accordingly, we will reverse the district court’s grant of summary judgment and remand for trial on the issues of: (1) the definition of “work performed” under paragraph 17 of the contract; (2) the pre-termination expenses incurred by Linan-Faye that are compensable as “work performed” under the termination for convenience clause; and (8) HACC’s possible liability for damages resulting from its retaining Linan-Faye’s bond after termination.
VII. SECTION 1983
Linan-Faye next asserts that the district court erred in granting summary judgment against it on its claim under 42 U.S.C. § 1983. Linan-Faye argues it has a protectible property interest in its contract with HACC that is entitled to Fourteenth and Fifth Amendment protection. Further, Li-nan-Faye contends that HACC’s retention of its performance bond implicates a liberty interest entitled to constitutional protection. In granting summary judgment, the district court held that whatever property interest Linan-Faye may have had, it does not rise to a sufficient level of certainty or dependency to merit constitutional protection. Linan-Faye Construction Co. v. Housing Authority of Camden,
We agree with the district court’s resolution of this matter. This Court recently surveyed the law concerning Fourteenth Amendment claims based on contracts with state entities. Unger v. National Residents Matching Program,
As we explained in Unger, relevant Supreme Court cases and cases from other courts of appeals instruct that two general types of contract rights are recognized as property protected under the Fourteenth Amendment: (1) where “the contract confers a protected status, such as those ‘characterized by a quality of either extreme dependence in the case of welfare benefits, or permanence in the case of tenure, or sometimes both, as frequently occurs in the case of social security benefits’”; or (2) where “the contract itself includes a provision that the state entity can terminate the contract only for cause.” Id.
Declaring that the contract in Unger did not fall into either of the two protected categories, we dismissed Unger’s § 1983 claim. Id. at 1402. We relied in part on the reasoning of our previous decision in Reich v. Beharry,
Many ... courts have observed that if every breach of contract by someone acting under color of state law constituted a deprivation of property for procedural due process purposes, the federal courts would be called upon to pass judgment on the procedural fairness of the processing of a myriad of contract claims against public entities. We agree that such a wholesale federalization of state public contract law seems far afield from the great purposes of the due process clause.
Reich,
Linan-Faye’s contract with HACC does not fall into either of the two categories we delineated in Unger. The contract does not confer a protected status on the plaintiff and the state entity could terminate the contract for reasons other than for cause. Indeed, it could be terminated for convenience. To grant Linan-Faye a remedy under § 1983 would create the wholesale federalization of state public contract law that concerned us in Unger and Reich. Accordingly, the district court did not err in granting summary judgment for HACC on Linan-Faye’s claim.
Turning to Linan-Faye’s assertion that it has been deprived of a constitutionally protected liberty interest, we also find that the district court did not err in granting summary judgment for HACC. The Court of Appeals for the Second Circuit addressed a case factually similar to the one at hand in S & D Maintenance Co. v. Goldin,
VIII.' ESTOPPEL CLAIMS
Linan-Faye’s final contention is that HACC is precluded from refusing to pay compensation by reason of principles of equitable and judicial estoppel. Linan-Faye argues that HACC could have terminated for convenience in 1988 but that it did not, and it breached a duty of fairness by waiting two years before deciding to terminate. Linan-Faye relies on a single case, M. & O. Disposal Co. v. Township of Middletown,
We find Linan-Faye’s equitable estoppel claim unpersuasive. HACC could have terminated for convenience in 1988, but it also could have pursued completion of the contract according to its terms. HACC’s decision to terminate after an inability to agree to such terms does not breach a duty of fairness. Indeed, this termination was within HACC’s rights under the contract and, as explained above, the constructive termination for convenience doctrine allows HACC to convert its original termination into a termination for convenience.
Moreover, Linan-Faye’s reliance on M. & 0. Disposal is misplaced. That case involved the question of whether a municipality impliedly ratified a contract for extra work which was outside the scope of contract to dispose of garbage. Id.,
Linan-Faye’s argument for judicial estoppel is also unpersuasive. Judicial estoppel precludes a party from assuming a position in a legal proceeding inconsistent with one previously asserted to the prejudice of an adverse party. Brown v. Allied Plumbing & Heating Co.,
IX. CONCLUSION
In sum, we find that the .district court erred in its decision to apply federal common law and not the law of New Jersey to resolve this dispute. Applying New Jersey law, we will reverse the district court’s grant of summary judgment and remand for trial on the issues of material fact that are in dispute. The three issues that remain in dispute in this ease are the definition of “work perr formed” under paragraph 17 of the contract, whether and to what extent Linan-Faye incurred preparatory expenses prior to termination that are compensable as “work performed” under paragraph 17, and HACC’s possible liability for damages resulting from its withholding of Linan-Faye’s performance bond after termination. Finally, we will affirm the district court’s grant of summary judgment in favor of HACC on Linan-Faye’s § 1983 claim.
. Paragraph 17 of this contract's General Conditions of the Contract for Construction states in relevant part:
a. Subject to the approval of HUD, the performance of work under this contract may be terminated by the PHA in accordance with this paragraph in whole, or from time to time in part, whenever the Contracting Officer shall determine that such termination is in the best interest of the PHA. Any such termination shall be effected by delivery to the Contractor of a Notice of Termination specifying the extent to which the performance of the work under the contract is terminated, and the date upon which such termination becomes effective.
b. If the performance of the work is terminated, either in whole or in part, the PHA shall be liable to the Contractor for reasonable and proper costs resulting from such termination, which costs shall be paid to the Contractor within 90 days of receipt by the PHA of a properly presented claim setting out in detail: (1) the total cost of the work performed to date of termination less the total amount of contract payments made to the contractor ...; and (5) an amount constituting a reasonable profit on the value of work performed by the Contractor.
App.Vol. II at 45.
. Linan-Faye styles its appeal as containing seven issues. Brief of Appellant at ix-x. The first of these issues, according to Linan-Faye, is that the district court engaged in impermissible fact finding on contested matters. Given our conclusion concerning the application of the termination for convenience clause, however, this issue is best resolved in conjunction with a discussion of the proper application of that clause. See discussion infra part VI.
.. Still another distinction exists between the instant case and the cases the district court relied upon in applying federal common law to interpret this contract. American Pipe & Steel and Taylor involved direct United States government procurement contracts, or a subcontract with a United States government prime contractor. American Pipe & Steel,
. Linan-Faye also cites Donovan v. Bachstadt,
. Additionally, the quoted language in Dobson represents only the opinion of a single judge on this matter. The relevant issue was not addressed in the New Jersey Supreme Court opinion affirming this case.
. Linan-Faye argues that decisions of the New Jersey Supreme Court such as W.V. Pangborne & Co. v. New Jersey Dept. of Transportation,
. We recognize that the district court also applied federal common law to resolve this dispute. Linan-Faye Construction Co.
. HACC argues that the last paragraph of this letter which states that HACC has "instructed the Modernization Office to assist [Linan-Faye] as . needed in obtaining release of [Linan-Faye’s Bond],” App. at 115, is inconsistent with a default termination because if HACC had terminated for a default it was entitled to hold onto the bond. Just because HACC had the right to hold onto the bond under the contract, however, does ’ not mean that it intended to exercise this right at the time of the letter. HACC may not have felt that the defaults it cited, such as a failure to begin work, were compensable via the bond,' or it may have decided that it did not wish to encourage litigation over the bond issue. In any event, this paragraph provides insufficient.support for HACC’s argument that this letter constituted a termination for convenience.
. See discussion infra this part.
. HACC received a grant pursuant to the Public and Indian Housing Comprehensive Improvement Assistance Program (“CIAP”). CIAP grants, which are administered by HUD, require recipients to set forth various terms and conditions in their agreements with contractors. 24 C.F.R. § 968.110(j) (1994). The regulations concerning CIAP grants, collected at 24 C.F.R. § 85.1 et seq., differ from the FAR's applicable to direct government procurement contracts. The CIAP grant regulations do not provide for a mandatory conversion clause.
.The "government” involved in these cases is typically the United States government. In the instant case, the entity seeking to terminate for convenience is the Housing Authority of Camden. While the doctrine of constructive termination for convenience originally developed to allow the-United States government maximum flexibility to deal with military contractors during times of war, the expansion of this doctrine into areas other than those involving military contracts suggests that its precepts should be applied to all government entities that provide services to the public. Of course, the final word on this issue rests with the New Jersey Supreme Court.
. Notably, the disagreement among the judges in that case was on the precise issue of whether it was appropriate to create a stricter test for convenience terminations by the government. Id. at 773-74 (Friedman, C.J., Davis, J., and Nichols, J. concurring) While all the judges agreed on the result in that case, the court could not muster a majority to embrace the new "changed circumstances” test.
. Linan-Faye also cites a law review note written shortly after the Torncello decision in support of its claims. Stephen N. Young, Note, Limiting the Government's Ability to Terminate For Its Convenience Following Tornecello [sic], 52 Geo. Wash.L.Rev. 892 (1984). In that note, the author suggests that Tomcello provides a reason to eliminate the government’s right to constructively terminate for convenience. Id. at 911. As this author was writing without the benefit of recent decisions, all that can be said of his recommendation is that future courts declined to take the hint.
. The dissent states that the majority “holds that a deterioration in business relations, demonstrated in not insignificant part by a dispute over specifications, constitutes such a change in circumstances.” See infra at 937 (emphasis added). The dissent is incorrect insofar as it reads this to be the holding of our decision. As we have already explained, Torncello, and its changed circumstances approach, has been sharply limited by more recent cases. See discussion supra this Part. We have therefore declined to endorse wholeheartedly the changed circumstances approach. Accordingly, an accurate statement of our position is that (1) Linan-Faye has not demonstrated actual bad faith on the part of HACC and (2) this case does not present the divisive facts presented in Torncello that warranted finding against the government.
. At oral argument, Linan-Faye suggested that the application of paragraph 16(d) of the General Conditions of this Contract "trumps" the constructive application of the paragraph 17 termination for convenience clause. Paragraph 16(d) states, in pertinent part:
The Contractor's right to proceed shall not be terminated or the Contractor charged with damages under this clause if:
(1) The delay in completing the work arises from unforeseeable causes beyond the control and without the fault or negligence of the Contractor. Examples of such causes include (1) acts of God, or of the public enemy, (ii) acts of the PHA or other governmental entity in either its sovereign or contractual capacity (iii) acts of another contractor in the performance of a contract with the PHA (iv) fires
App. Vol II at 45.
This subsection of paragraph 16 carves out an exception to when HACC can terminate for default.
While Linan-Faye’s argument goes to whether HACC breached the agreement in terminating for default, it cannot prevent application of the constructive termination for convenience doctrine. The very premise of the College Boat decision is that a party may defend a suit for breach on the grounds that a legal excuse existed at the time of the alleged breach. College Boat,
. See supra note 1 for the text of paragraph 17.
. The district court also refers, in a footnote, to letters exchanged between the parties that purportedly explain the understanding of the parties concerning the definition of "work performed." The fact that the court goes beyond the contract and looks to these letters to reinforce its conclusion demonstrates the impropriety of granting summary judgment and the need to make such decisions on a more fully developed record.
. Linan-Faye argues that it is entitled to damages because of HACC’s improper withholding of its performance bond both before and after termination. Concerning Linan-Faye’s claim for damages for pre-termination withholding of the bond, we agree with the district court that such damages are not recoverable because the termination for convenience clause controls and does not provide for such recovery. Claims arising from events following termination, however, would not be governed by the termination for convenience clause.
. We recognize that Linan-Faye’s complaint in this matter does not set forth a theory of recovery for damages due to improper retention of the performance bond following termination. In-' deed, the complaint could not set forth such a theory because the events giving rise to this aspect of Linan-Faye’s claim (i.e., HACC’s continued refusal to relinquish the bond during the pendency of the specific performance action) did not occur until after the complaint wa§ filed. Nevertheless, the district court made findings on this issue. Linan-Faye,
Hete, HACC lawfully received Linan-Faye’s performance bond pursuant to a contract between the parties. Following termination, however, HACC’s legal right to retain the bond is the subject of the dispute that must be resolved on remand. If the jury were to find HACC liable for improper retention of the bond, the appropriate measure of damages would be compensation for jobs lost by Linan-Faye (after termination) that resulted from HACC's improper action.
. See infra Part V for analysis of the constructive termination for convenience doctrine.
Concurrence Opinion
Concurring and Dissenting.
I join in Parts I, II, and III of the majority opinion. However, I dissent from Part IV because I do not agree that New Jersey would apply to this garden variety construction dispute between a builder and a local governmental agency precepts drawn from a potpourri of federal cases which amount at best to a hodgepodge, and at worst to a regime so inhospitable and unfair to small contractors who deal with government agen
I also find myself unable to join in Part VII, dealing with Linan-Faye’s 42 U.S.C. § 1983 claims. I cannot agree with the majority that HACC’s arguably improper retention of Linan-Faye’s performance bond, which the company requires in order to engage in any business, did not impair Linan-Faye’s liberty interest. I do, however, join the majority with respect to its rejection of Linan-Faye’s property interest claim.
I. What Law Would New JeRsey Apply?
The majority, notwithstanding the considerable authority of the Dobson case, supra Maj.Op. at 921, reasons that because there are no cases in New Jersey construing the effect of termination for convenience clauses, “courts in New Jersey would recognize that where the parties have incorporated a particular clause pursuant to federal regulation, they do so against the backdrop of federal case law addressing the clause,” and hence would adopt federal law, whatever that may be. That is the sum and substance of the majority’s argument. It is, I suggest, pretty “thin soup,” neither documented nor reasoned.
The majority’s prediction also ignores the facts that should govern the analysis required in such circumstances. A review of the facts Linan-Faye has advanced and supported in connection with the summary judgment motion — which are glossed over by the majority — will illuminate the correct prediction of New Jersey law. At this stage, these facts must obviously be viewed in the light most favorable to Linan-Faye, the non-moving party. See Goodman v. Mead Johnson & Co.,
A The Facts Viewed in the Light Most Favorable to Linan-Faye
It is undisputed that the parties had a binding $4,264,000 contract for the rehabilitation of 244 housing units. Linan-Faye, with declarations cognizable in summary judgment proceedings: (1) represents itself to be an experienced, highly regarded contractor that was ready, willing, and able to perform the job in a timely fashion; (2) states that through incompetence, poor planning, or other contractors’ delay, the HACC failed or refused to give Linan-Faye even a Notice to Proceed for a full year; and (3) submits that after finally giving that Notice, HACC then .proceeded, without'justification, to delay Li-nan-Faye for almost another year. Linan-Faye also represents that HACC never supplied' Linan-Faye with a list of which vacant units to work on; that turmoil reigned at HACC as the Executive Director was replaced by a new Acting Executive Director, Gregory Kern, in July 1990; and that Kern decided to “clean house” by, inter alia, summarily terminating Linan-Faye’s contract.
It is also undisputed that in the course of the termination dialogue, HACC never suggested that the termination was “for convenience.” All the discussion and written notices instead alleged- contractor default, which Linan-Faye staunchly denied. Moreover, whether or not it was legally required, HACC never got HUD approval to terminate for convenience. Indeed, HACC did not invoke the termination for convenience clause until two years after termination, when the litigation began. Most importantly, during the period from September 1988 through August 1991, HACC held Linan-Faye’s performance bonds, effectively precluding Linan-
B. General New Jersey Contract Law Principles
Under general common law contract principles, applicable in New Jersey and elsewhere, one who breaches a contract must compensate the injured non-breaching party so as to put it in the position it would have occupied had performance been rendered as promised. Donovan v. Bachstadt,
The New Jersey courts have long maintained a liberal rule that non-breaching parties are entitled to damages. Cf. In re Merritt Logan, Inc.,
The reluctance of the New Jersey Courts to give expansive effect to exculpatory clauses extends to eases involving its own government agencies. See, e.g., Buckley & Co., Inc. v. State,
C. New Jersey and the Federal Law Alternative .
This is not the first ease in which a court applying New Jersey law has had to adjudicate a contract dispute with some federal connection. In Edward J. Dobson, Jr., Inc. v. Rutgers,
The policy factors that have lead [sic] to the development of this concept in federal contracts, such as a need to expand or abandon a particular arms program with*936 consequent economic impact on contractors and subcontractors, do not warrant state courts adopting it wholesale by judicial fíat when traditional remedies for breach of contract are available. Id.,157 N.J.Super. 357 ,384 A.2d at 1153 n. 10.
This holding was affirmed by both the intermediate appellate court and Supreme Court of 'New Jersey and strongly suggests that New Jersey courts would not import the federal concept of constructive termination for convenience into its public construction contracts jurisprudence.
As the majority correctly points out, because there is no reported New Jersey precedent interpreting a “termination for convenience” clause, it is the function of this court to predict how the New Jersey Supreme Court would rule if confronted with this issue. In my view, there is no reason to believe that that court, if called upon to resolve the question, would jettison a century of settled contract law supporting liberal contract remedies and narrowly construing similar exculpatory provisions in order to adopt a harsh — and harshly criticized, see infra — federal interpretation of the clause at issue here. In this case, the. retroactive application of this dramatic change in the law imposed by the majority to the factual scenario described above not only exacerbates the harshness of the result but also increases my confidence that the New Jersey Supreme Court would never have adopted this interpretation.
D. The Termination of Convenience Provision and Its Harsh Construction by the. Majority
The termination for convenience clause has, as the majority explains, a long lineage, dating from the Civil War era. During that era federal government contracting was attended by much impropriety and scandal. See generally Carl Sandburg, Abraham Lincoln, The War Years (1948). The modern (post-1970) incarnation of the clause is ensconced in the Code of Federal Regulations:
If the contractor can establish,, or if it is otherwise determined that the contractor was not in default or that the failure to perform is excusable; i.e., arose out of causes beyond the control and without the fault or negligence of the contractor, the [prescribed default clauses] provide that a termination for default will be considered to have been a termination for the convenience of the Government....
Federal Acquisition Regulations (“FAR’s”), 48 C.F.R. § 49.401(b) (1993). The FAR’s apply to direct United States government procurement (including HUD procurement). They do not apply to grants of federal funds to local public housing authorities. The district court acknowledged this undisputed point. (Dist.Ct.Op. at 18 n. 7)
Moreover, regulations that govern grants to local housing agencies contain their own specific scheme and procedures for federally funded contracts made by state and local housing authorities that are separate and distinct from the FAR’s. These “CIAP” requirements mandate a variety of terms and provisions that must be set forth in such contracts, including a termination for convenience clause. See 24 C.F.R. § 85.36(i)(2). In contrast to the FAR’s, however, the Administrative Requirements for CIAP Grants do not include any counterpart to the automatic conversion language of 48 C.F.R. § 49.401(b), or the other specific termination provisions found in HUD’s own FAR’s. This is consistent with the mandate of the CIAP enabling statute, which is designed to allow the housing authority grantees maximum discretion and individualized judgment. 42 U.S.C.S. § 1437i(e)(l)(E), (e)(4)(D) (1994).
The absence of an express conversion clause in the Administrative Requirements for Grants is significant because, under the venerable maxim of statutory construction, expressio únius est exclusio alterius, the inclusion of one is the exclusion of another. As I see it, the exclusion of an automatic conversion provision in the Requirements for Public Housing Authority Contracts (when specifically included in HUD’s own FAR’s) expresses an intent to exclude such a provision, unless local PHA administrators choose to include it. Cf. Marshall v. Western Union Tel. Co.,
Before contracts with the federal government included automatic conversion clauses, courts did not permit government agencies to use the termination for convenience clauses to escape from a breach. In Klein v. United States,
The problems confronted by government contracting officers operating under the Klein rule resulted in the adoption of the automatic conversion clause by regulation, 48 C.F.B. § 49.401(b). The clause now appears in most direct federal government procurement contracts. However, as the Rogerson court noted in footnote 5 of its opinion, where the “automatic conversion clause” is not made part of the contract, either expressly or by regulation, the Klein rule remains fully applicable and bars the .implication of such clause. Rogerson,
But even if HACC had initially invoked its termination for convenience clause, thus avoiding the issue of the absence of a conversion clause, HACC could not avoid liability in this case. The majority acknowledges that the ease law construing the termination for convenience clause has retrenched from its high water mark. While the majority’s discussion does not clearly depict the current state of the law, the leading cases appear to hold that government agencies can only, invoke the clause where there has been some change in the circumstances of the parties. See Torncello,
The majority constructs a regime under which a dispute arising out of a garden variety contract between a builder and a local housing authority, which is not a federal government contract but only a local agency contract to which Certain federal regulations apply, has been severed from its common law roots. The majority’s application of selected federal cases renders these local agency contracts virtually illusory by giving an arguably defaulting local agency the right to. avoid its own breach, and sharply limit its liability simply by incanting the termination for convenience clause two years after the fact. In my view, it is inconceivable that the New Jersey Supreme Court, which has so consistently supported liberal awards of contract
This conclusion is strongly buttressed by the scathing criticism that has been levied at Tomcello and the cognate jurisprudence. See, e.g.,. Stephen N. Young, Note, Limiting the Government’s Ability To Terminate for Convenience Following Tornecello, 52 Geo. Wash.L.Rev. 892 (1984) (suggesting that the Tomcello decision provides a reason to eliminate the government’s ability to terminate for convenience entirely).
Because I do not believe that the New Jersey Supreme Court would adopt the federal interpretation but would instead continue to give exculpatory clauses such as the termination for convenience clause only narrow — if any — effect, I dissent.
II. The § 1983 Claim
I also dissent from the majority’s affir-mance of the summary judgment granted on Linan-Faye’s § 1983 claim. While I agree that Linan-Faye’s interest in the contract did not rise to a property interest protected by the Constitution, I cannot agree that HACC’s unjustified retention of Linan-Faye’s performance bond did not deprive Linan-Faye of a protected liberty interest.
The majority dismisses Linan-Faye’s claim rather summarily, overlooking precedent which would, in my view, require reversal. The right to follow a chosen profession free from unreasonable interference comes within both the liberty and property concepts of the Fifth and Fourteenth Amendments. See Greene v. McElroy,
In S & D, although the Court of Appeals for the Second Circuit framed the § 1983 claim as one challenging the plaintiffs dismissal from government employment, which clearly did not rise to a constitutional violation, the true basis of the plaintiffs liberty claim was that New York City’s refusal to pay amounts already due had essentially forced the company out of business and left it “tottering near bankruptcy, unable to get work, as a direct result of the city’s alleged breach of the contracts and withholding of payments.” S & D,
Without the use of its bonding line, Linan-Faye was paralyzed: It could not bid on any significant contracts and thus could not replace the business lost through the government’s breach. Hence, because HACC’s arguably unjustified retention of the bond did impinge on protected liberty interests, the district court erred by awarding the defendant summary judgment on this claim. I
. I take no position on Parts VLB through F and VIII of the majority opinion, as they are outside the ambit of this effort, except to note that the discussion of HACC’s delay in invoking the termination for convenience clause, see Part VIII, supports my views insofar as it highlights the dubiousness of HACC’s ex post reliance thereon.
. As my discussion explains, I believe that this result would follow even if New Jersey were to look to federal law, for I do not think New Jersey would read federal law so expansively as does the majority.
Lead Opinion
SUR PETITION FOR REHEARING
March 13, 1995
The petition for rehearing filed by appellant having been submitted to the judges who participated in the decision of this court and to all the other available circuit judges of the circuit in regular active service, and no judge who concurred in the decision having asked for rehearing, and a majority of the circuit judges of the circuit in regular active service not having voted for rehearing by the court in banc, the petition for rehearing is denied.