Case Information
*1 In the United States Court of Federal Claims No. 13-599C
August 29, 2014
* * * * * * * * * * * * * * * * * * *
THRESHOLD TECHNOLOGIES, *
INC. *
* Plaintiff, * Motion to Dismiss; Third-Party * Beneficiary; Privity of Contract. v. * *
UNITED STATES, *
*
Defendant. *
*
* * * * * * * * * * * * * * * * * *
Scott L. Levitt , Lаw Offices of Levitt Law, APC, Seal Beach, CA, for plaintiff. Gregg P. Yates , Trial Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, D.C., for defendant. With him were Donald E. Kinner , Assistant Director, Commercial Litigation Branch, Robert E. Kirschman, Jr. , Director, Commercial Litigation Branch, Civil Division, and Stuart F. Delery , Assistant Attorney General.
O P I N I O N
HORN, J.
Plaintiff, Threshold Technologies, Inc. (Threshold) [1] brings this action against the United States related to the National Aeronautics and Space Administration’s (NASA’s) alleged failure to pay plaintiff for airplane operations, maintenance, and installation/disintegration services. ” Threshold alleges that it provided these services as a subcontractor to a government contract between Flight Test Associates and NASA for “High Ice Water Content testing;” contract NNC11BA04B (the prime contract), and that it then continued to provide these services upon request from NASA after the prime contract between NASA and Flight Test Associates ended. Threshold states that the prime contract between Flight Test Associates and NASA for “High Ice Water Content testing ” required “the fitting of specialized government owned equipment,” on a jet aircraft, and “subsequent flights with such equipment providing data to NASA pertaining *2 to weather conditions, specifically in a reas of high ice accumulation.” Plaintiff claims it has an express and implied-in- fact contract with the government, and is “a third party intended beneficiary to the” prime contract between the governme nt and Flight Test Associates. Plaintiff claims, therefore, that defendant (1) breached an express contract with plaintiff, [2] (2) breached an implied contract with plaintiff, (3) breached the covenant of good faith and fair dealing in contracts, and (4) is liable to plaintiff under a theory of quantum meruit. Plaintiff seeks as relief, “$562,559.69 for services provided , ” interest, attorney’s fees, and costs of the suit. [3]
Defendant filed a partial motion to dismiss for lack of subject matter jurisdiction and for failure to state a claim upon which relief may be granted, pursuant to Rule 12(b)(1) and Rule 12(b)(6) of the Rules of the United States Court of Federal Claims (RCFC) (2014). Defendant contends that the government never entered into an express contract with plaintiff, Threshold, and that plaintiff is not an intended third-party beneficiary to the prime contract between the government and Flight Test Associates. Defendant, however, “does not move to dismiss count II of Threshold’s complaint to the extent that it is based upon a theory of breach of an implied-in-fact contract for services performed after the October 19, 2012 decision by the Government to terminate the FTA [Flight Test Associates] contract for default.” (emphasis in original). Defendant contends that plaintiff’s third claim for relief, fo r a breach of the implied covenant of good faith and fair dealing, fails to state a claim upon which relief can be granted: “B ecause the complaint acknowledges that the parties have no express contract, there can be no implied covenant of good faith and fair dealing. ” Defendant, finally, contends that plaintiff’s fourth claim for relief, under a theory of quantum meruit, is an implied-in-law contract claim outside of this court’s jurisdiction under the Tucker Act, 28 U.S.C. § 1491 (2012).
FINDINGS OF FACT
According to plaintiff, on December 20, 2010, NASA entered into a contract, NNC11BA04B, with Flight Test Associates for “High Ice Water Content testing.” Plaintiff ’s complaint attaches a portion of the prime contract between Flight Test Associates and NASA, which was signed on behalf of NASA by contracting officer Timothy M. Bober and the president of Flight Test Associates, John Ligon. According to the prime contract’s first page, the prime contract between Flight Test Associates and NASA was awarded to Flight Test Associates on December 20, 2010. [4]
Defendant attaches to its motion t o dismiss plaintiff’s complaint the prime contract’s statement of work. The statement of work for the prime contract between Flight Test Associates and NASA does not reference Flight Test Associates or the subcontractor Threshold. According to the introduction to the statement of work:
Over the past 10 years, there have been a significant number of jet engine power-loss events (flameout, stall, rollback and surge) occurring in and around areas of deep tropical convection at higher altitudes (mostly above 20,000 ft).
. . .
The intent of this contract is for a Contractor to provide an aircraft modified with Government furnished instrumentation to conduct High Ice Water Content (HIWC) flight research during a trial flight campaign and primary flight campaign(s) based out of Darwin Australia during the monsoon season between January - March. This Statement of Work (SOW) sets forth the requirements to conduct HIWC research through an Aircraft Services Contract. The research to be conducted by the Government will require close coordination between Government and Contractor personnel during all phases of this contract.
According to the scope of the statement of work for the prime contract between Flight Test Associates and NASA , “[t]he Contractor shall provide all personnel (including pilots), equipment, tools, etc., except as provided in Section 4.1 or as otherwise noted, necessary to conduct the HIWC research flights required to meet NASA's testing requirements.” The statement of work also explains that:
*4 The Contractor shall provide . . . Aircraft Preparation . . . an aircraft as specified in Section 4.3 and integrate all instrumentation as specified in Section 4.1 of this document on the aircraft while coordinating the instrument locations, mounting design concepts and fabrication, and instrument installation with NASA and partner researchers and aviation safety personnel.
(emphasis in original). The statement of work indicates that the prime contractor was also to be responsible for, “ Trial Flight Campaign ,” “ Primary Flight Campaign(s) ,” and “ Aircraft final de-integration and return of Government Furnished Properly (GFP) and partner hardware .” (emphasis in original).
The prime contract between Flight Test Associates and NASA states under SCOPE OF CONTRACT , ” “[t]he contractor shall, except as otherwise specified herein, furnish all personnel, facilities, materials and services required to perform the work outlined in Section C hereof. ” (capitalization and emphasis in original). The prime contract between Flight Test Associates and NASA was to be a firm fixed price contract for $9,962,787.00. The prime contract between Flight Test Associates and NASA states that payments to the contractor were to be milestone-based, with separate payments after plaintiff completed “Aircraft Preparation,” “Trial Flight Campaign,” “Primary Flight Campaign,” “Aircraft De - integration and Return of GFP,” with an “Option for an Additional Flight Camp aign.” The prime contract further states that, “[o]nly the Contracting Officer may issue task orders to the Contractor ,” and that “[n] o other costs are authorized unless otherwise specified in the contract or expressly authorized by the Contracting Officer .”
The prime contract between Flight Test Associates and NASA put the risk of delay or issues with the aircraft on the prime contractor, Flight Test Associates:
In accordance with Section 8.5 of the Statement of Work, the following performance standards will exist for calculating payments for aircraft usage under task orders:
(a) Should the aircraft preparation schedule get delayed due to Contractor issues and prevent NASA from conducting the flight campaigns as stated in this SOW, the Government will not incur any costs for occupying the aircraft from the start of the originally proposed flight campaign to the start of the actual flight campaign. (b) When a flight is not possible during a given day due to failure of the Contractor's equipment or documentation to pass NASA safety requirements, the aircraft occupancy payment may be reduced by 10% for each day lost for that week.
(c) NASA will not pay for flights benefiting the Contractor, such as flights for maintenance testing, for ferrying to and from maintenance *5 facilities, flights required following an engine change, commercial charters, and flights solely for transporting Contractor's personnel.
The prime contract between Flight Test Associates and NASA also incorporates by reference Federal Acquisitions Regulations 52.233-4 APPLICABLE LAW FOR BREACH OF CONTRACT CLAIM (OCT 2004) , ” “ 52.242-13 BANKRUPTCY (JUL 1995) ,” as well as “ 52.249-8 DEFAULT (FIXED PRICE SUPPLY AND SERVICE) (APR 1984) .” (capitalization and emphasis in original).
Plaintiff alleges that, “FTA [Flight Test Associates] does not, nor has it ever owned a Gulfstream II aircraft, or any other aircraft that could be used under the Contract.” Plaintiff further alleges that, “[d]efendant had complete knowledge of the fact that FTA [Flight Test Associates], the ‘Contractor’ under the Contract did not own such aircraft.” Plaintiff contends that Section H.13 of the prime contract between Flight Test Associates and NASA makes clear that the contractor would be relying on a subcontractor to provide the aircraft. According to Section H.13 of the prime contract between Flight Test Associates and NASA:
H.13 MONITORING OF SUBCONTRACTOR
The parties agree that this contract was negotiated on the basis that the Contractor's proposed operations subcontractor, Threshold Aviation Group,[ [5] ] will provide the aircraft under lease to the prime contractor and will be performing contract requirements related to the airworthiness of the aircraft, aircraft operations, and aircraft maintenance. The parties agree that the proposed subcontractor's performance is critical to the success of the contract. Therefore, the Contracting Officer's written approval is required for any substitution of another operations subcontractor. Additionally, the Contractor shall ensure that the subcontractor's operations conform to all contract requirements, including, without limitation, the requirement that performance conform to the requirements of NPR 7900.3, Aircraft Operations Management, as set forth in sections 6-8 of the Statement of Work (SOW) and the requirements pertinent to the authority and responsibility of the NASA Test Director as set forth in section 8.10.9 of the SOW.
*6 The Contractor shall ensure that there are clear lines of communications, including, when necessary, direct communications, between the Government and the operations subcontractor to ensure airworthiness, and safe and successful operations and maintenance of the aircraft. Nothing herein relieves the Contractor from responsibility for performing this contract.
(emphasis and capitalization in original). Threshold states that itself, “Defendant, and FTA [Flight Test Associates], all knew and understood prior to, at the time of execution, during and after the Contract duration that Plaintiff [Threshold] was to provide all of the services required to ready and maintain the Aircraft under the Contract requirements,” however, Threshold does not assert in its complaint that it ever provided the physical aircraft.
In its complaint, plaintiff Threshold provides a copy of a subcontract agreement between Threshold and the prime contractor Flight Test Associates, titled an AIRCRAFT OPERATING AGREEMENT , ” “by and between Threshold Technologies, Inc., a California corporation, having its principal office at 8352 Kimball Avenue, Hangar #3, Chino, California 91708 (hereinafter referred to as ‘TTI’ ), and Flight Test Associates, Inc., a Delaware corporation, having its principal office at 1031 Mobley, Hangar 100, Mojave, California, 93501 (here inafter referred to as ‘FTA’).” (emphasis and capitalization in original). The term of the operating agreement between Threshold and Flight Test Agreement was to be for twenty-nine months, ending on May 31, 2013. Under the operating agreement between Threshold and Flight Test Agreement, Threshold was to provide to Flight Test Associates one pilot for “any and all Flights conducted under the NASA Contract for the HIWC program,” “Train, Monitor and track Flight Crews per the NASA Contract requirements,” provide one mechanic and one quality assurance inspector for maintenance purposes, source all jet fuel, and “[c]onduct all domestic and international fl ight planning activities.” In addition, under the operating agreement between Threshold and Flight Test Agreement, Threshold was to modify the aircraft for the NASA experiments, provide security for the aircraft, and , “at no cost to FTA, provide all maintenance and aircraft related services required by NHFP [New Hampshire Flight Procurement LLC] for Aircraft support and maintenance under the Aircraft Lease Agreement,[ [6] ] during the term of that agreement.” Under the operating agreement, at the conclusion of the prime contract between Flight Test Associates and NASA, Flight Test Associates was to “return the Aircraft to its original condition and *7 operating category as described in the NHFP Aircraft Lease Agreement. Upon the return of the Aircraft to its original category by FTA, the Aircraft will be delivered to TTI who will Re- Install the Interior in the Aircraft.” According to the operating agreement between Threshold and Flight Test Agreement, Flight Test Associates agreed to pay hourly rates for the pilots, pilot training activities, mechanic, and inspector. The operating agreement also provides a table with prices for other maintenance and modification services plaintiff would provide to Flight Test Associates.
The operating agreement between Threshold and Flight Test Associates contained many provisions in case either party defaulted. Threshold would be in default under the operating agreement if it failed “to provide its services for Aircraft operational, maintenance and support services when due, ” and the failure continued un-remedied for ten days after written notice. Either party would be in default if it, for example, failed to “perfo rm or observe any other covenant, condition or agreement . . . ” with out remedy within ten days after written notice, or if it made a false representation, “cease[d] doing business as a going concern,” filed for bankruptcy, or had an insolvency order, judgment, or decree entered against it that was not resolved within sixty days. If a party to the operating agreement between Threshold and Flight Test Agreement was in default, the non- defaulting party, could “at its option, declare this Agreement to be in def ault,” “[t]erminate or cancel this Agreement upon 10 days notice of default” unless the default was cured, and,
recover from the defaulting Party damages and sue for any and all applicable remedies, including, but not limited to, specific performance of this Agreement, costs and damages related to the non-defaulting Parties [sic] inability to complete its HIWC contract with NASA, costs of de- modification of the Aircraft and for reasonable attorney's fees.
If Threshold were to default, Flight Test Associates also was allowed additional remedies under the operating agreement. This included obtaining the same services elsewhere and charging Threshold for any excess costs incurred, causing Threshold, “at TTI's expense, to return the Aircraft to FTA,” and reta king “possession of the Aircraft” without liability for damage. The operating agreement between Threshold and Flight Test Agreement stated that “[n]o governmental approval other than that of NASA which is already received is required for FTA or TTI (together with its affiliates AMG [Aircraft Maintenance Group] and TAC [Threshold Air Charter]) to enter into this Agreement.”
Also attached to plaintiff Threshold ’s complaint is an “ ADDENDUM TO AIRCRAFT OPERATING AGREEMENT , ” between Threshold and Flight Test Associates. (capitalization and emphasis in original). The addendum was written because “the parties have met, discussed and defined a payment schedule that will address outstanding invoices that are the subject of a lien Threshold has filed with the Federal Aviation Administration (FAA), and litigation filed by FTA in the Kern County Superior Court, ” in California. The operating agreement addendum between Threshold and Flight Test Agreement laid out a schedule for future payments by Flight Test Associates to plaintiff, which were to be paid into an escrow account managed by *8 plaintiff’s counsel. The operating agreement also stated that “FTA will within five working days dismiss the action, Case Number S-1500-CV-276992, filed in the Kern County Superior Court, Metropolitan Division. “ Flight Test Associates represented in the addendum that “FTA here by [sic] does represent that it has been, continues to be, and will be solvent during the course that it engages Threshold for work on the project which is the subject of this Addendum and Agreement.” The operating agreement was signed by John Ligon, President of Flight Test Associates, and Mark DiLullo, Chief Executive Officer of Threshold on July 27, 2012.
According to Threshold ’s complaint, “[w]ithin the first few months of the [prime] Contract duration, FTA began to breach the Contract, and had stopped paying Plaintiff [Threshold] and other subcontractors, suppliers, and vendors .” Plaintiff alleges that “[o]n June 14, 2012, Mark DiLullo, CEO of Threshold, sent Ron Colantonio and Peter Struk, both of NASA, a letter detailing the lack of payment by FTA:” Specifically, FTA has breached its agreement with TTI {Threshold
Technologies Inc.} by failing to make timely payments for services provided by TTI. The current amount exceeds $244,000 with invoices dating back as far as March 4, 2011.
A meeting was held on Tuesday, June 12, 2012 at FTA's office . . . At the meeting FTA advised TTI that it was unable to pay TTI for any of the current or past due amounts and that FTA was unwilling to discuss or establish a payment schedule for the invoices that are currently due and payable. Further, FTA was unwilling to provide any assurances as to when TTI would be paid, if at all . . . ”
(modifications in original). Plaintiff continued , “[d]espite this June 14, 2012 letter, NASA continued to make payments to FTA, even though they had actual knowledge that Plaintiff had not received payments due.” Plaintiff states that on August 29, 2012, Mr. John Ligon, “president and owner of F TA, ” passed away, and that, “FTA, without its owner, essentially ceased to function and continued to default with regard to its obligations under the Contract and in its failure to pay Plaintiff. ” On September 21, 2012, NASA sent a cure notice e-mail to Flight Test Associates, stating that: “You [Flight Test Associates] are hereby notified that the Government considers FTA's current financial condition and failure to remain current on its financial obligations to be conditions that are endangering performan ce of the contract.” On October 9, 2012, NASA sent Flight Test Associates another e-mail, stating in relevant part:
FTA notified NASA on September 25, 2012 that the personnel working on the HIWC project were furloughed, and all ongoing work on aircraft modifications was stopped. On September 28 th , NASA leased hangar space for the G-II [Gulfstream II] at ASB Avionics and requested that FTA coordinate the movement of the plane from the FTA hangar to the ASB hangar in order to provide a more secure environment for the plane and *9 the Government property on board. NASA has been paying the hangar rental fees since that date.
NASA was copied on a letter from attorney Scott L. Levitt dated October 1, 2012 indicating that FTA is in default of the lease terms with New Hampshire Flight Procurement. This letter leaves us uncertain as to the status of the plane. NASA's current lease of the ASB hangar space is paid through 10/12/12. Because there is still a substantial amount of Government property on board the plane, and the ongoing status of the HIWC project within NASA is still undetermined, we need to ensure that the aircraft will be kept in a secure location where Government personnel can have continued access.
We have not received any notice from FTA regarding any change in the official status of the aircraft lease. NASA is hereby requesting response to the following questions:
1. What is the current status of the aircraft lease between FTA and NHFP?
2. Who has legal custody of the aircraft at this time?
3. Is the aircraft currently covered by insurance? What are the limits of that coverage?
4. What is your intent regarding the location of the plane and the hangar rental beyond 10/12/12?
Please respond to the above questions by October 11, 2012 and copy both myself and NASA counsel Jerald Kennemuth.
Plaintiff Threshold alleges that, finally, “after numerous correspondence s by Plaintiff and NASA, regarding lack of payments and lack of progress by FTA on the Contract requirements, on October 19, 2012, NASA terminate d the Contract with FTA.” According to defendant, on November 3, 2012, “Threshold arranged to fly the aircraft from NASA’s leased hangar in to its own hangar in Chino, California.[ [7] ] At the time that Threshold moved the aircraft, the aircraft still had NAS A’s HWIC [sic] [High Ice Water Content testing] equipment installed in it. ” (internal citation omitted). According to *10 plaintiff’s complaint, the aircraft was being stored at plaintiff’s facility “at Plaintiff’s expense.”
Threshold contends, however, that even though the plane was moved to Threshold’s facility, “NASA continued to maintain dominion and control over the Gulfstream II aircraft, and continuously communicated with Plaintiff [Threshold] directly regarding the security of the Aircraft and Defenda nt's equipment.” Plaintiff presents as “[e]vidence of such possession,” “a March 12, 2013 e -mail sent by Karin Huth, Contracting Officer of NASA to Plaintiff stating, ‘Onсe these items have been removed from the plane, I anticipate that NASA will want to do a final review of the aircraft and will then be ready to have the plane returned to possession by the aircraft owner.’” Plaintiff further contends, “[s]ince March 2011, through the date of the filing of this Complaint, Plaintiff has performed work and/or stored the Aircraft at the request and benefit of NASA,” and that “Plaintiff has requested payment for such work/and or [sic] storage.”
Plaintiff alleges that on March 25, 2013 , “[a]fter months of unanswered payment requests,” “Mark DiLullo, CEO of Pla intiff, sent Karin Huth, Contracting Officer for NASA, a letter requesting past due payments for work performed under the Contract.” A copy of a letter, dated March 25, 2013, from Threshold to Ms. Huth, states in relevant part:
As a follow up to the March 25 th correspondence, we believe that a meeting with yourself and any other appropriate NASA personnel is appropriate. TAG [Threshold Aviation Group], NHFP and NASA need resolution and closure in the form of payment for services rendered and the return of government owned property, which are mutually exclusive. A fast and friendly resolution is in the best interests of all parties.
The letter included a list of “ TAG [Threshold Aviation Group] Unpaid Costs and Loss of Revenue Resulting From HIWC Cancellation .” (capitalization and emphasis in original). According to plaintiff, on April 18, 2013, the NASA “ Contracting Officer sent back a response denying all of the amounts request [sic] except for one, in the amount of $22,528.00, which had previously been paid by Defendant as of the date of the letter .”
According to plaintiff, “ [f]inally, on May 15, 2013, NASA had the final government owned equipment removed from the Aircraft .” On June 13, 2013, plaintiff sent “its formal, certified claim letter to Karin Hu th, Contracting Officer for NASA,” for $562,559.69. Plaintiff states that on August 14, 2013 , “ Plaintiff received the response from NASA to its June 13, 2013, certified claim. Such response denied all damages and denied all monies sought. ”
Plaintiff filed a complaint in this court, alleging four causes of action. Plaintiff first claims that defendant breached (1) an express contract with plaintiff, arguing at the same time that plaintiff is an intended third party beneficiary to the prime contract *11 between the government and Flight Test Associates. Plaintiff also claims defendant breached (2) an implied contract with plaintiff, and (3) the covenant of good faith аnd fair dealing. Finally, plaintiff (4) argues for recovery under a theory of quantum meruit. Plaintiff seeks “$562,559.69 for services provided,” interest, attorney’s fees, and costs of the suit.
In response, defendant filed a motion to dismiss for lack of subject matter jurisdiction and for failure to state a claim upon which relief may be granted, pursuant to RCFC 12(b)(1) and RCFC 12(b)(6). Regarding plainti ff’s breach of express contract claim, defendant maintains that, [t]he contracts attached to the complaint demonstrate that the Government, through its agency NASA, contracted only with FTA for the procurement of flight services, and the prime contract had no provision indicating that the Government would be directly liable to FTA’s vendors . ” [8] Defendant also contends that plaintiff is not an intended third party beneficiary under the prime contract, as “[t]he complaint does not allege that the entire purpose of any provision of the prime contract is to grant Threshold a right to payment.” Regarding plaintiff’s breach of implied contract claim, defendant does not move to dismiss whether or not an implied-in-fact contract could have come into existence after October 19, 2013, the date NASA cancelled the prime contract between Flight Test Associates and NASA. Defendant maintains, however, that any implied-in-law contract claims are outside of th is court’s jurisdiction under the Tucker Act. R egarding plaintiff’s breach of the covenant of good faith and fair dealing claim, defendant argues that plaintiff states a claim upon which relief cannot be granted, because the covenant does not apply “[b] ecause the complaint acknowledges that the parties have no express contract. ” Finally, regarding plaintiff’s quantum meruit claim, defendant argues that the claim is an implied-in- law contract argument, “outside this Court’s jurisdiction.”
DISCUSSION
It i s well established that “‘subject -matter jurisdiction, because it involves a
court’s power to hear a case, can never be forfeited or waived.’” Arbaugh v. Y & H
Corp., 546 U.S. 500, 514 (2006) (quoting United States v. Cotton, 535 U.S. 625, 630
(2002)). “[F ]ederal courts have an independent obligation to ensure that they do not
exceed the scope of their jurisdiction, and therefore they must raise and decide
*12
jurisdictional questions that the parties either overlook or elect not to press.” Henderson
ex rel. Henderson v. Shinseki, 131 S. Ct. 1197, 1202 (2011); see also Gonzalez v.
Thaler, 1 32 S. Ct. 641, 648 (2012) (“When a requirement goes to subject -matter
jurisdiction, courts are obligated to consider sua sponte issues that the parties have
disclaimed or have not presented.”); Hertz Corp. v. Friend, 559 U.S. 77, 94 (2010)
(“Courts have an independent obligation to determine whether subject -matter
jurisdiction exists, even when no party challenges it.” (citing Arbaugh v. Y & H Corp.,
546 U.S. at 514)); Avid Identification Sys., Inc. v. Crystal Import Corp., 603 F.3d 967,
971 (Fed. Cir.) (“This court must always determine for itself whether it has jurisdiction to
hear the case before it, even when the parties do not raise or contest the issue.”), reh’g and reh’g en banc denied,
While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff’s obligation to provide the “grounds” of his “entitle[ment] to relief” requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Papasan v. Allain, 478 U.S. 265, 286 (1986) (on a motion to dismiss, courts “are not bound to accept as true a legal conclusion couched as a factual allegation”). Factual allegations must be enough to raise a right to relief above the speculative level, see 5 C. Wright & A. Miller, Federal Practice and Procedure § 1216, pp. 235-36 (3d ed. 2004) (hereinaf ter Wright & Miller) (“[T]he pleading must contain something more . . . than . . . a statement of facts that merely creates a suspicion [of] a legally cognizable right of action”), on the assumption that all the allegations in the complaint are true (even if doubtful in fact), see, e.g., Swierkiewicz v. Sorema N.A. , 534 U.S. 506, 508 n.1 (2002) (“Rule 12(b)(6) does not countenance . . . dismissals based on a judge’s disbelief of a complaint’s factual allegations”); Scheuer v. Rhodes, 416 U.S. 232, 236 (1974) (a well- pleaded complaint may proceed even if it appears “that a recovery is very remote and unlikely”). . . . [W]e do not require heightened fact pleading of specifics, but only enough facts to state a claim to relief that is plausible on its face.
Bell Atl. Corp. v. Twombly, 550 U.S. at 555-56, 570 (footnote and other citations
omitted; brackets and omissions in original); see also Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. at 555 – 57, 570); Bell/Heery v.
United States, 739 F.3d 1324, 1330 (Fed. Cir.), reh’g and reh’g en banc denied (Fed.
Cir. 2014); Kam-Almaz v. United States , 682 F.3d 1364, 1367 (Fed. Cir. 2012) (“The
facts as alleged ‘must be enough to raise a right to relief above the speculative level, o n
the assumption that all the allegations in the complaint are true (even if doubtful in
fact).’” (quoting Bell Atl. Corp. v. Twombly, 550 U.S. at 555)); Totes-Isotoner Corp. v.
United States, 594 F.3d 1346, 1354-55 (Fed. Cir.), cert. denied, 131 S. Ct. 92 (2010);
Bank of Guam v. United States , 578 F.3d 1318, 1326 (Fed. Cir.) (“In order to avoid
dismissal for failure to state a claim, the complaint must allege facts ‘plausibly
suggesting (not merely consistent with)’ a showing of entitlement to relief.” (qu oting Bell
Atl. Corp. v. Twombly, 550 U.S. at 557)), reh’g and reh’g en banc denied (Fed. Cir.
2009), cert. denied,
When deciding a case based on a lack of subject matter jurisdiction or for failure
to state a claim, this court must assume that all undisputed facts alleged in the
complaint are true and must draw all reasonable inferences in the non-movant's favor.
See Erickson v. Pardus , 551 U.S. 89, 94 (2007) (“In addition, when ru ling on a
defendant's motion to dismiss, a judge must accept as true all of the factual allegations
contained in the complaint.” (citing Bell Atl. Corp. v. Twombly,
Defendant in its motion to dismiss contends that there is no privity of contract between the government and Threshold .” Contract claims against the United States are governed by the Tucker Act, which grants jurisdiction to this court as follows:
The United States Court of Federal Claims shall have jurisdiction to render judgment upon any claim against the United States founded either upon the Constitution, or any Act of Congress or any regulation of an executive department, or upon any express or implied contract with the United States, or for liquidated or unliquidated damages in cases not sounding in tort.
28 U.S.C. § 1491(a)(1) (2012). As interpreted by the United States Supreme Court, the
Tucker Act waives sovereign immunity to allow jurisdiction over claims against the
United States (1) founded on an express or implied contract with the United States, (2)
seeking a refund from a prior payment made to the government, or (3) based on federal
constitutional, statutory, or regulatory law mandating compensation by the federal
government for damages sustained. See United States v. Navajo Nat., 556 U.S. 287,
289-90 (2009); United States v. Mitchell, 463 U.S. 206, 215 (1983); see also Kam-
Almaz v. United States, 682 F.3d at 1368; Greenlee Cnty., Ariz. v. United States, 487
*15
F.3d 871, 875 (Fed. Cir.), reh’g and reh’g en banc denied (Fed. Cir. 2007), cert. denied,
To have privity of contract with the government, and, therefore, invoke the
jurisdiction of the United States Court of Federal Claims for its breach of contract сlaim,
plaintiff “must show that either an express or implied-in-fact contract underlies [the]
claim.” Trauma Serv. Grp. v. United States,
“A party alleging either an express or implied -in-fact contract with the government
‘must show a mutual intent to contract including an offer, an acceptance, and
consideration.’” Bank of Guam v. United States, 578 F.3d at 1326 (quoting Trauma
Serv. Grp. v. United States,
*17
Although plaintiff argues that defendant breached an express contract between
plaintiff and the federal government, plaintiff confuses this claim with its other, primary
argument that plaintiff is an “intended third party beneficiary” under the prime contract between Flight Test Associates and the federal government. The United States Court of
Appeals for the Federal Circuit has viewed claims for relief due to third party beneficiary
status as distinct from claims for relief due to privity of express or implied contract. See
Sioux Honey Ass'n v. Hartford Fire Ins. Co., 672 F.3d 1041, 1056 (Fed. Cir.), cert.
denied,
Plaintiff Threshold alleges that both parties “provided consideration for the Contr act,” one of the requirements of contract formation, since “ Plaintiff, provided the services necessary and required under the Contract, and Defendant promised to pay compensation in exchange for such services.” Plaintiff, however, does not allege any written agreement between plaintiff and defendant, or any form of unconditional acceptance or intent by government to be bound to plaintiff. Plaintiff does not contend that it ever was a signatory party to the prime contract between Flight Test Associates and the federal government, and admits in its complaint that it was a “subcontractor . ” The contract plaintiff provides only shows, as signatories, the government contracting officer and Mr. Ligon from Flight Test Associates. The prime contract contains none of the terms one would expect to see if the government intended to contract directly with plaintiff, such as a length of employment or prices for the various services plaintiff was to provide. The prime contract between Flight Test Associates and NASA also does not specify a right of recourse against the government on behalf of any subcontractor – only Section H.13, “ MONITORING OF SUBCONTRACTOR ” even mentions any subcontractor. (capitalization and emphasis in original). Threshold’s operating agreement with Flight Test Associates also provides no suppor t for plaintiff’s claim that it expressly contracted with the federal government. Although the operating agreement between Threshold and Flight Test Agreement states that the NASA’s approval was required for the operating agreement to be effective, nowhere in operating agreement is there any indication NASA committed itself to directly compensating plaintiff for its services, nor is NASA a signatory to the operating agreеment. Instead, the operating agreement between Threshold and Flight Test Agreement makes clear that, in the event of nonpayment, Threshold is to seek recourse against Flight Test Associates , and
recover from the defaulting Party [Flight Test Associates or Threshold, depending on who defaults] damages and sue for any and all applicable remedies, including, but not limited to, specific performance of this Agreement, costs and damages related to the nondefaulting Parties [sic] inability to complete its HIWC contract with NASA, costs of de-modification of the Aircraft and for reasonable attorney's fees.
Plaintiff, therefore, has failed to demonstrate that an express contract was created between Threshold and the United States government.
Alternatively, plaintiff argues that Threshold is an intended third party beneficiary to the prime contract between defendant and Flight Test Associates. According to plaintiff:
The fact that the Contract explicitly lists the subcontractor, dedicates an entire section to the subco ntractor, and states that the, “ subcontractor's performance is critical to the suc cess of the contract . . .” more than satisfies the Court's requirements that, the contract reflect the express or implied intention of the [contracting] parties to benefit the third party.
(modification in original). Plaintiff repeats Section H.13 of the prime contract, stating:
“H.13 MONITORING OF SUBCONTRACTOR
The parties agree that this contract was negotiated on the basis that the Contractor's proposed operations subcontractor, Threshold Aviation Group, will provide the aircraft under lease to the prime contractor . . . The parties agree that the proposed subcontractor's performance is critical to the success of the contract. . . {emphasis added} The Contractor shall ensure that there are clear lines of communications, including, when necessary, direct communications, between the Government and the operations subcontractor to ensure airworthiness, and safe and successful operations and maintenance of the aircraft.” (modifications and emphasis in original). Plaintiff argues that, Plaintiff, Defendant, and FTA, all knew and understood prior to, at thе time of execution, during and after the Contract duration that Plaintiff was to provide all of the services required to ready and maintain the Aircraft under the Contract requirements.” Plaintiff states that “[t]he installation and maintenance of NASA's monitoring equipment is the salient item under the Contract,” and that plaintiff exclusively provided such services.
Plaintiff points to Chevron U.S.A. v. United States, a 2013 decision by a Judge of this court, for the proposition that:
“For third party beneficiary status to be conferred on a party, the ‘ contract
must reflect the express or
implied
{emphasis added} intention of the
[contracting] parties to benefit the third-party. ’ Montana v. United States ,
Defendant responds that “[t]he Federal Circuit recognizes that third parties to a
contract with the Government may sue the Government only if the ‘contract reflect[s] the
express or implied intention of the [contracting] parties to benefit the third- party.’”
(quoting State of Montana v. United States,
Defendant claims that plaintiff’s reference to Chevron U.S.A., Inc. v. United States is misplaced , because, “[c]ontrary to Threshold’s assertion otherwise, Chevron U.S.A., Inc. did not involve a plaintiff that was an ‘actual owner (in fee simple or via lease) of certain oil fields, ’” who then leased the oil fields to the government. Instead, according to defendant, in Chevron U.S.A., Chevron already had a contract with the government, acquired through its predecessor Standard Oil, regarding the “joint operation and production of a petroleum reserve. ” De fendant contends that the dispute in Chevron U.S.A. concerned the narrow issue of ex parte communications with an independent petroleum engineеr responsible for allocating rights between Chevron and the government, and that,
in finding that Chevron was a third party beneficiary of the prime contract, the Court expressly found that the prime contract parties intended to benefit Chevron upon the ground that the entire purpose of the 1996 agreement between the Government and the IPE [independent petroleum engineer] was to assist the Department and Chevron in finalizing their interest in certain oil fields.
(citing Chevron U.S.A. v. United States,
Instead, defendant analogizes the above captioned case to the United States Court of Appeals for the Federal Circuit ’s decision in Flexfab, LLC v. United States, 424 F.3d 1254. Defendant contends that in Flexfab, the United States Court of Appeals for the Federal Circuit held that intent to benefit requires more than notice; but also that the government “‘ knows of a condition precedent to a third- party’s performance as a sub - contractor, and specifically modifies the prime contract so as to ensure the third- party’s continued performance. ’ ” (quoting Flexfab, LLC v. United States, 424 F.3d at 1263) (emphasis in original).
Regarding third party beneficiary status, the United States Supreme Court wrote: it is recognized as an exception to the general principle, which proceeds on the legal and natural presumption that a contract is only intended for the benefit of those who made it. Before a stranger can avail himself of the exceptional privilege of suing for a breach of an agreement to which he is not a party, he must, at least, show that it was intended for his direct benefit.
German Alliance Ins. Co. v. Home Water Supply Co., 226 U.S. 220, 230 (1912); see
also Robins Dry Dock & Repair Co. v. Flint, 275 U.S. 303, 307 (1927); Sioux Honey
Ass'n v. Hartford Fire Ins. Co. , 672 F.3d at 1056 (“‘In order to prove third party
beneficiary status, a party must demonstrate that the contract not only reflects the
express or implied intention to benefit the party, but that it reflects an intention to benefit
the party directly .’” (quoting Glass v. United States, 258 F.3d 1349, 1354 (Fed. Cir.)))
(emphasis in original), amended on reh'g, 273 F.3d 1072 (Fed. Cir. 2001); G4S Tech.
LLC v. United States,
Id.; FloorPro, Inc. v. United States, 98 Fed. Cl. 144, 147 (2011), vacated on other
grounds,
The analysis, however, is not completely black-and-white; courts can look past
the words of the contract, although only in exceptional circumstances. See State of
Montana v. United States, 124 F.3d at 1273 (“T he intended beneficiary need not be
specifically or individually identified in the contract . . . . ” ); G4S Tech. LLC v. United
States,
H.13 MONITORING OF SUBCONTRACTOR
The parties agree that this contract was negotiated on the basis that the Contractor's proposed operations subcontractor, Threshold Aviation Group, will provide the aircraft under lease to the prime contractor and will be performing contract requirements related to the airworthiness of the aircraft, aircraft operations, and aircraft maintenance. The parties agree that the proposed subcontractor's performance is critical to the success of the contract. Therefore, the Contracting Officer's written approval is required for any substitution of another operations subcontractor.
. . .
The Contractor shall ensure that there are clear lines of communications, including, when necessary, direct communications, between the Government and the operations subcontractor to ensure airworthiness, and safe and successful operations and maintenance of the aircraft. Nothing herein relieves the Contractor from responsibility for performing this contract.
Section H.13 puts additional requirements on the pri me contractor to “ensure that there are clear lines of communications, including, when necessary, direct communications, between the Government and the operations subcontractor to ensure airworthiness, and safe and successful operations and maintenance of the aircraft.” The clause also requires “written approval” by the government before the aircraft subcontractor is switched. The last sentence of the provision, “[n]othing herein relieves the Contractor from responsibility for performing this contract,” further emphasizes that the clause is designed to place burdens on the prime contractor, Flight Test Associates, and protect the government, not create a third party beneficiary relationship with plaintiff Threshold.
An examination of the remedies for default and payment provisions under the
prime contract between Flight Test Associates and NASA, and the operating agreement
between Threshold and Flight Test Associates, also do not support plaintiff’s argument
that it is a third party beneficiary of the prime contract between Flight Test Associates
and NASA. No particular right to payment, or remedy in case of default was made
specifically available to plaintiff Threshold in the prime contract between Flight Test
Associates and NASA, nor are any facts alleged that indicate that the government
specifically modified, or intended to modify the prime contract to guarantee any payment
*25
or assurance of payment to the third party. Cf. Kawa v. United States,
In Flexfab, the decision by the United States Court of Appeals for the Federal Circuit is an indication of how difficult it is to achieve third party beneficiary status in a contract with the United States. In Flexfab, the Defense Logistics Agency, Defense Supply Center Columbus contracted with Capital City Pipes, Inc. (Capital City Pipers) to supply air duct hose. See Flexfab, L.L.C. v. United States, 424 F.3d at 1257. “As a supplier without manufacturing capabilities, Capital City [Pipes] entered into a sub- contract with C & S [C & S Industrial Supply Co.], which in turn entered into a sub- contract with Flexfab for production of the hose.” Id. Upon request from Flexfab, Capital City Pipes sent a letter to the government to request a modification of the prime contract between Capital City Pipes and the government, so that Flexfab’s address could be given as the “Place of Performance” and the destination for remittance of payment. See id. at 1258. The fact that this modification was made specifically for Flexfab’s benefit was unknown to the agency. See id. Capital City Pipes, however, neglected to change the electronic remittance account to send electronic payments to Flexfab. See id. After delivery by the subcontractor, Flexfab to the government, the agency paid Capital City Pipes in full, electronically, and, subsequently, “Capital City later became insolvent and *26 never paid Flexfab.” See id. In affirming a United States Court of Federal Claims decision not to award plaintiff third party beneficiary status, the Federal Circuit stated: The record reflects that neither Mr. Cook [Chief Executive Officer of C &S Industrial Supply Co.], nor Mr. Taylor [an agency small business specialist], nor any Flexfab personnel ever communicated with the contracting officers to explain and memorialize the alleged demand by Flexfab that it would perform only if paid directly by the government into an escrow account for its benefit. In short, Flexfab reliеd entirely on others, mainly Capital City, to assure that Flexfab, not Capital City, would receive direct payment for the delivered hose.
Id. at 1258. The Flexfab court stated that, “the contracting officer's understanding of the situation that is key,” and emphasized that Flexfab failed to ensure that the contracting officer was aware of, and agreed to, any intent to benefit Flexfab through modification of the prime contract between Capital City Pipes and the government. See id. The Flexfab court stated that “[n]either the contract nor the modification shows intent by the contracting officers to benefit Flexfab by linking in any way the remittance address to Flexfab. Looking beyond the contract itself, Flexfab can point to no evidence of record that establishes such intent.” Id. at 1264. In the above captioned case, the mere mention of the subcontractor in a section that discusses monitoring and oversight, coupled with some discussion about the importance of the subcontractor’s services, similarly does not indicate any intent by the government’s contracting officer to link payment, or any other right under the contract, to the subcontractor. [9]
Although not cited by the parties, another case also involving the failed Capital City Pipes entity, is instructive. In Kawa v. United States, the plaintiff, as the escrow agent, represented another subcontractor to Capital City Pipes also producing hose equipment, JGB Enterprises. See Kawa v. United States, 86 Fed. Cl. at 578. The plaintiff was the “remit to” beneficiary in the prime contract between Capital City Pipes and the Defense Logistics Agency. See id. at 578, 580 (internal quotation omitted). Although the prime contractor, Capital City Pipes, and plaintiff understood this to mean “that it reflected the Government’s acceptance of an assignment from Capital City to JGB of the right to receive payment,” the government, and Lu Ann Boscy, the contracting officer, did not share that view. See id. at 580. The agency continued remitting to Capital City Pipes, and after Capital City Pipes went bankrupt, plaintiff sued for payments under the contract. See id. The Kawa court held, quoting from Flexfab, that:
*27
Unfortunately for plaintiff, as in Flexfab ,
Id. at 587 (quoting Flexfab, L.L.C. v. United States,
In the case currently before the court, even with every factual inference viewed in
the most favorable light to plaintiff, Threshold, offered no indication of any effort to make
its alleged right to payment under the prime contract between Flight Test Associates
and NASA known to the government’s contracting officer, until well after payments
stopped being received by Threshold from the prime contractor Flight Test Associates.
See id. at 588; Flexfab, L.L.C. v. United States, 424 F.3d at 1263. Threshold did not
attempt to amend the prime contract between Flight Test Associates and NASA to have
NASA remit payments directly to Threshold, like the plaintiffs in Kawa and Flexfab
attempted to do. See Kawa v. United States, 86 Fed. Cl. at 588; Flexfab, L.L.C. v.
United States, 424 F.3d at 1258. The court in Kawa stated that “[o]f course, the
appearance of an entirely new entity in the remittance address, along with specific
notifications to the Government that rights under the contract were being assigned to
that entity and unmistakable Government recognition of that assignment would likely
create rights in the assignee.” Kawa v. United States, 86 Fed. Cl. at 588 – 89 (citing
Riviera Finance of Texas, Inc. v. United States, 58 Fed. Cl. 528 (2003)). Neither in
Kawa, nor in Threshold’s case, however, did those actions occur or were alleged to
have occurred. Cf. JGB Enters., Inc. v. United States, 63 Fed. Cl. 319, 334 (2004),
motion for relief from judgment denied,
Plaintiff points to discussions plaintiff had with the government about Flight Test Associates’ failure to pay its subcontractors . Plaintiff alleges that it informed NASA that it was not getting paid by Flight Test Associates as early as June 14, 2012 , when “[o]n June 14, 2012, Mark DiLullo, CEO of Threshold, sent Ron Colantonio and Peter Struk, both of NASA a letter detailing the lack of payment by FTA.” Plaintiff, Threshold also states that “[a]fter months of unanswered payment requests, on March 25, 2013, Mark *28 DiLullo, CEO of Plaintiff [Threshold], sent Karin Huth, Contracting Officer for NASA, a letter requesting past due payments” from its subcontract with Flight Test Associates. Plaintiff also states in its complaint that [s]ince March 2011, through the date of the filing of this Complaint, Plaintiff has performed work and/or stored the Aircraft at the request and benefit of NASA,” and that during that time “Plaintiff has requested payment for such work/and or storage.” None of those conversations indicate, however, that plaintiff would not perform unless a “condition precedent” was met by the government, or that the contracting officer was going to modify “the prime contract [ between Flight Test Associates and NASA] so as to ensure the third party's continued performance.” See Flexfab, L.L.C. v. United States, 424 F.3d at 1263. Defendant correctly contends that intent to endow third party beneficiary status requires more than notice to the government; but also that the government “‘knows of a condition precedent to a third - party’s performance as a sub -contractor, and specifically modifies the prime contract so as to ensure the third- party’s continued performance.’ ” (quoting id.) (emphasis in original). In fact, plaintiff admits that, despite not being paid, “Plaintiff has performed work and/or stored the Aircraft at the request and benefit of NASA, ” indicating that it did not exercise any condition precedent with the government.
The decision in G4S Technology LLC v. United States also speaks to plaintiff’s
contention that its numerous correspondences with the government somehow garnered
a third party beneficiary right in the prime contract to plaintiff. In G4S Technology LLC v.
United States, a subcontractor, G4S Technology LLC (G4S), provided engineering
services to the prime recipient of a loan by the federal Rural Utilitiеs Service, named
Open Range, for the construction of rural wireless broadband. See G4S Tech. LLC v.
United States,
[I]n 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 contract provision for the express purpose of effectuating payment from the government to the subcontractor(s). This showing can be satisfied by the unambiguous language of the prime contract and any modifications made thereto, and by other objective evidence that clearly demonstrates the authorized official's unambiguous intent to ensure payment to the subcontractor(s). The court will not, however, infer that the government intended to directly benefit the subcontractor merely because an authorized government official (1) oversees the activities of the prime contractor; (2) becomes aware that the *29 prime contractor has failed to timely pay its subcontractors, and/or (3) makes funds available to the prime contractor in order for the prime contractor to pay its subcontractors.
Id. at 672 – 73. The G4S Technology court found that, despite the agency being aware of vendor issues, “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.” Id.
Similarly, in the above captioned case, NASA’s mere awareness of plaintiff’s difficulties getting payment from Flight Test Associates was insufficient to create a third party status, as plaintiff, Threshold, has failed to allege that the agency “ unambiguously agreed to modify ” any agreement in order to effectuate payment to plaintiff. See id. The court in G4S Technology also went on to find that increased oversight by the government on the prime contractor still fails to create a third party beneficiary status in a subcontractor. See id. (“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 the above captioned case, the provision “ H.13 MONITORING OF SUBCONTRACTOR ” similarly allowed for close oversight of Flight Test Associates by the government, but, as in G4S Technology, did not empower any subcontractor with third party beneficiary status. (capitalization and emphasis in original) The case plaintiff points to, Chevron U.S.A. v. United States, is distinguishable from the above captioned case. In Chevron U.S.A., as noted above, Chevron's predecessor, Standard Oil Company and the United States had entered into an earlier contract governing joint operation and production of Naval Petroleum Reserve No. 1. ” Chevron U.S.A., Inc. v. United States, 110 Fed. Cl. at 752 –53. The government’s interest was then transferred to the Department of Energy. See id. at 754. To resolve the equity allocation within Naval Petroleum Reserve No. 1 between Chevron and the Department of Energy, Congress required the Department of Energy to determine the equity interests after obtaining the recommendation from an independent petroleum engineer, who was mutually acceptable to the parties. See id. The contract engaging the independent petroleum engineer was made between the Department of Energy and the engineer, and Chevron was not a party to it. See id. at 798 – 99. As part of this process, the Department of Energy and Chevron agreed on a procedure for interacting with the engineer, which “p rohibitеd Chevron and DOE [the Department of Energy] from having ex parte communications with the ” expert. See id. at 756. The Department of Energy was found to have breached this protocol in a number of ways. See id. at 800. Although the government tried to argue that Chevron could not bring suit for this breach, as it was not in privity with the engagement contract between the Department of Energy and the independent petroleum engineer, the court found that Chevron was a third party beneficiary to the agreement. See id. at 782 – 83. The court directed that, to determine whether a non-party to a contract is a third party beneficiary, the court must ‘ look to *30 whether the beneficiary would be reasonable in relying on the promise as manifesting an inte ntion to confer a right on him.’” Id. at 783 (quoting Dewakuku v. Martinez, 271 F.3d at 1041). The Federal Circuit in Dewakuku found:
In this case, the July 8, 1996 contract between DOE and the Equity IPE expressed that both DOE and the Equity IPE intended Chevron to benefit from the procedures set forth in the Equity IPE Protocol. The Equity IPE was retained to provide “independent and impartial” equity determinations to “adequately protect” the interests of both DOE and Chevron. In fact, Ms. Egger agreed that it was reasonable for Chevron to rely on the ex parte prohibition in the Equity IPE Protocol.
Dewakuku v. Martinez,
The unique fact pattern in Chevron U.S.A. is far different from the procurement contract at issue in the above captioned case. The contract in Chevron U.S.A. was designed also to “protect” the interests of Chevron in a dispute between the Department of Energy and Chevron, and the Department of Energy stated that Chevron could reasonably rely on the contract. See id. In plaintiff’s case, however, the prime contract between Flight Test Associates and NASA makes clear that, “[t]he intent of this contract is for a Contractor to provide an aircraft modified with Government furnished instrumentation to conduct High Ice Water Content (HIWC) flight research.” There is no evidence the contract was intended to protect or assure payment to any subcontractor, no matter how critical their role, or that the contracting officer ever indicated that Threshold could rely on the prime contract between Flight Test Associates and NASA to create a direct relationship with defendant.
Plaintiff relies on the fact that the services it provided to Flight Test Associates
were essential to the prime contract, since high-altitude atmospheric testing requires a
working airplane and a pilot. Plaintiff notes that “[t]he installation and ma intenance of
NASA's monitoring equipment is the salient item under the Contract.” The importance of
a third party to a contract, however, does not mean the parties to the contract intended
their arrangement to directly benefit the third party. See Sioux Honey Ass'n v. Hartford
Fire Ins. Co. ,
Plaintiff also argues in its complaint that “[f]rom October 19, 2012 ( the day
Defendant explicitly cancelled the Contract), until the present day, Defendant has
utilized Plaintiff ’s services and/or facilities,” and that “[f]rom November 3, 2012 through
at least August 15, 2013, Defendant has had the Aircraft stored at Plaint iff’s facility.” Plaintiff states that, therefore, from October 19, 2012, “Defendant imposed an obligation
on Plaintiff,” and created an implied contract between Threshold and the government.
Although plaintiff does not clarify in its complaint what type o f “implied” contract it is
referring to, in its response to defendant’s motion to dismiss plaintiff’s complaint, plaintiff
states that it its jurisdictional arguments are in part, “based upon the theories of . . .
implied-in- fact contract.” Defendant “does not move to dismiss count II of Threshold’s
complaint to the extent that it is based upon a theory of breach of an implied-in-fact
contract for services performed after the October 19, 2012 decision by the Government
to terminate the FTA contract for defa ult.” (emphasis in original). To the extent plaintiff
argues that an implied-in-law contract arose between plaintiff and defendant, as is
discussed more below, the court does not have jurisdiction to resolve claims arising
from implied-in-law contracts. See Lumbermens Mut. Cas. Co. v. United States, 654
F.3d 1305, 1316 (Fed. Cir.), reh’g en banc denied (Fed. Cir. 2011); Cent. Freight Lines,
Inc. v. United States, 87 Fed. Cl. 104, 112 n.8 (2009); Enron Fed. Solutions, Inc. v.
United States,
Plaintiff claims a breach of the covenant of good faith and fair dealing, alleging that “[b]eginning as early as March of 2011, or sooner, Defendant knew that FTA was defaulting in its duties under the Contract, including failure to make payment to vital parties who were essentially subcontractors,” and yet, despite communications of these failures by plaintiff, defendant failed to act. Plaintiff contends that this violated the covenant of good faith and fair dealing, as well as 48 C.F.R. § 1.602-2, which, according to plaintiff, “requires the contracting officer to ensure impartial, fair, and equitable treatment.” Plaintiff also contends that an implied contract for services was created after October 19, 2012, when NASA terminated its contract with Flight Test Associates, and that the government’s “refusal to compensate Plaintiff for the services provided and storage of the Aircraft constitutes a breach of Defendant’s implied and express duty of good faith and fair dealing.” Plaintiff also alleges that defendant “employed delay tactics” to get out of forming a cоntract with plaintiff, “all the while, slowly having Defendant’s property removed from the Aircraft and the Aircraft stored at Plaintiff’s facility.” Defendant argues that “‘[t]he coven ant of good faith and fair dealing is an implied duty *32 that each party to a contract owes to its contracting partner,’” quoting from Centex v. United States, 395 F.3d 1283, 1304 (Fed. Cir. 2005). Defendant states that “[t]he covenant of good faith and fair dealing, therefore, does not arise where the parties have no contract between them, as is the case here.” Defendant argues that the covenant of good faith and fair dealings requires that an “express” contract be in existence; an implied contract is insufficient. According to defendant, “[b]ecause the complaint acknowledges that the parties have no express contract, there can be no implied covenant of good faith and fair dealing.” Therefore, according to defendant, this claim must be dismissed “because it fails to state a claim upon which relief may be granted.”
“All government contracts contain an implied covenant of good faith and fair
dealing.” Nat’l Australia Bank v. United States , 55 Fed. Cl. 782, 790 (2003), aff’d , 452
F.3d 1321 (Fed. Cir. 2006). “However, the implied obligation ‘“must attach to a specific
substantive obligation, mutually assented to by the parties.”’” Detroit Housing Corp. v.
United States, 55 Fed. Cl. 410, 417 (2003) (quoting Allstates Air Cargo, Inc. v. United
States,
The government suggests that if the parties had wished to ensure against the risk of a change in the tax laws, they could have included a clause providing for the payment of damages in that event. While it is true that the parties could have included a clause specifically ensuring against legislation that destroyed the benefits of the contract, such covenants have not been required in the past to protect contracting parties against the risk of contract breaches by the government, see Winstar [v. United States], 518 U.S. [839,] at 887 [(1996))],116 S. Ct. 2432 (plurality opinion) . . . . Indeed, it would be inconsistent with the recognition of an implied covenant if we were to hold that the implied covenant of good faith and fair dealing could not be enforced in the absence of an express promise to pay damages in the event of conduct that would be contrary to the duty of good faith and fair dealing.
Id. at 1306 (modifications added); see also N. Star Alaska Housing Corp. v. United
States, 76 Fed. Cl. 158, 188 (2007) (rejecting the government’s proposition that it is
impossible to have “bad faith unless it is shown that a breach of an express contract
provision has o ccurred”). As shown above, the requirements for an express and
implied-in-fact contract are the same. See Night Vision Corp. v. United States, 469 F.3d
at 1375 (“The elements of an implied -in-fact contract are the same as those of an oral
express contract. ”); Hanlin v. United States ,
Plaintiff’s last claim for recovery is under a theory of quantum meruit. According to the Federal Circuit:
Quantum valebant is “[t]he reasonable value of goods and materials.” Black's Law Dictionary 1276 (8th ed. 2004). In general, the difference between quantum meruit and quantum valebant is that “[t]he former is said to apply to services and the latter to goods . . . .” Urban Data Sys., Inc. v. United States,699 F.2d 1147 , 1154 n. 8 (Fed. Cir. 1983).
United Pac. Ins. Co. v. United States,
Plaintiff contends that, “[w]ithin the last two years Plaintiff supplied and delivered
certain services at the special request of Defendant; and Defendant agreed to pay the
reasonable value of those goods.” Plaintiff further contends that although defendant had
“dominion and control” over the airplane, it never compensated plaintiff, and, therefore,
“h as been unjustly enriched by storing the Aircraft at Plaintiff ’ s facility for over eight
months without paying for such occupation.” Defendant argues, in response, that the
court’s jurisdiction under the Tucker Act “‘ extends only to contracts either express or
implied in fact, and not to contracts implied in law, ’” quoting Hercules, Inc. v. United
States,
The United States Court of Appeals for the Federal Circuit has indicated: A recovery in quantum meruit[ or quantum valebant,] is based on an implied-in-law contract. That is, a contract in which there is no actual agreement between the parties, but the law imposes a duty in order to prevent injustice. The Court of Federal Claims, however, lacks jurisdiction over contracts implied in law. 28 U.S.C. § 1491(a)(1) (2000).
Int’l Data Prods. Corp. v. United States ,
In limited circumstances, a contractor can seek recovery on a contract claim on a
quantum meruit or quantum valebant basis when, for example, the government
attempted to form a contract with a private party, but a defect prevented the contract
“from actually coming into existence or the government simply refuses to pay.” Enron
Fed. Solutions, Inc. v. United States,
Where a benefit has been conferred by the contractor on the government in the form of goods or services, which it accepted, a contractor may recover at least on a quantum valebant or quantum meruit basis for the value of the conforming goods or services received by the government prior to the rescission of the contract for invalidity . The contractor is not compensated under the contract, but rather under an implied-in-fact contract.”
United Pac. Ins. Co. v. United States, 464 F.3d at 1333 (quoting United States v. Amdahl Corp., 786 F.2d 387, 393 (Fed. Cir. 1986)) (footnote omitted; emphasis in original). The United States Court of Appeals for the Federal Circuit, in Perri v. United States, explained that the exception to the traditional rule to refer to quantum valebant or quantum meruit claims as implied-in-law claims requires that at some point there was an attempted express contrаct between the government and the plaintiff:
Perri relies upon cases in which this court, the Court of Claims, and the Court of Federal Claims recognized quantum meruit recovery. See, e.g., Gould, Inc. v. United States,935 F.2d 1271 (Fed. Cir. 1991); Prestex, Inc. v. United States, 162 Ct. Cl. 620, 320 F.2d 367 (1963). Those cases, however, involved situations in which the plaintiff provided goods or services to the government pursuant to an express contract, but the government refused to pay for them because of defects in the contract that rendered it invalid or unenforceable. Since in that circumstance it would be unfair to permit the government to retain the benefits of the bargain it had made with the plaintiff without paying for them, the courts utilized quantum meruit as a basis for awarding the plaintiff the fair value of what it supplied to the government.
We know of no case, however, and Perri has not cited any, in which either we, the Court of Claims, or the Court of Federal Claims has permitted quantum meruit recovery in the absence of some contractual arrangement between the parties. In the present case, the Court of Federal Claims ruled that there was no contract between Perri and the government to pay him twenty-five percent of the amount the government received from the forfeiture that Perri alleged he aided the government in obtaining.
Perri v. United States,
While it is true that the Federal Circuit and Court of Claims have permitted quantum meruit recovery , this occurs in the very limited circumstance *37 where a plaintiff provides services or goods to the government pursuant to an attempted express contract, but either some defect prevents an express contract from actually coming into existence or the government simply refuses to pay. See Perri v. United States,340 F.3d 1337 , 1343 – 44 (Fed. Cir. 2003) (citing Gould, Inc. v. United States,935 F.2d 1271 (Fed. Cir. 1991); United States v. Amdahl Corp., 786 F.2d 387, 393 (Fed. Cir. 1986); and Prestex, Inc. v. United States, 162 Ct. Cl. 620, 320 F.2d 367 (1963)). In this type of case, a contract is found if a meeting of the minds can be inferred, “as a fact, from conduct of the parties showing, in the light of the surrounding circumstances, their tacit understanding.” Hercules, 516 U.S. at 424, 116 S. Ct. 981 (quoting Baltimore & Ohio R.R. Co. v. United States,261 U.S. 592 , 597,58 Ct. Cl. 709 ,43 S. Ct. 425 , 67 L.Ed. 816 (1923)).
Enron Fed. Solutions, Inc. v. United States, 80 Fed. Cl. at 409 (footnote omitted;
emphasis in original); see also Council for Tribal Emp’t Rights v. United States, 112
Fed. Cl. at 252- 53 (“ quantum meruit permits the contractor to be ‘compensated under
an implied-in-fact contract when the contractor confers a benefit to the government in
the course of performing a government contract that is subsequently declared invalid.’”
(quoting Gould, Inc. v. United States, 67 F.3d at 930) (emphasis in original); Veridyne
Corp. v. United States, 83 Fed. Cl. 575, 585- 86 (2008) (“‘[T]hough a contract be
unenforceable against the Government, because not properly advertised, not
authorized, or for some other reason, it is only fair and just that the Government pay for
goods delivered or services rendered and accepted under it.’ Id. [United States v.
Amdahl Corp. ,
A Judge of United States Court of Federal Claims explained that to recover on a quantum meruit or quantum valebant basis, however, the circumstances must permit the court to conclude that all the basic elements of an implied-in-fact contract were present between plaintiff and the government at the time of the alleged contract creation, including mutual intent, offer, acceptance, consideration, and authority on behalf of the government party to contract:
“For contracts with the United States, however, an implied -in-fact contract — just as an express contract — requires an authorized agent of the Gov ernment.” Trauma Service Group v. United States, 104 F.3d at 1326 (citing City of El Centro v. United States, 922 F.2d 816, 820 (Fed. Cir. 1990)). Importantly, an implied-in-fact contract will not be found if an express contract already covers the same subject matter. Id. [Trauma Serv. Grp. v. United States, 104 F.3d at 1326]; see also Atlas Corp. v. United States,895 F.2d 745 , 754 – 55 (Fed. Cir. 1990).
Enron Fed. Solutions, Inc. v. United States,
CONCLUSION
For the foregoing reasons, plaintiff did not enter into in an express contract with defendant and is not a third party beneficiary to the prime contract between the federal government and Flight Test Associates, nor can plaintiff recover under a theory based on a contract implied in law. Plaintiff has pleaded sufficient facts to support a claim based on plaintiff’s implied in fact contract theory and it is not dismissed. Therefore, defendant’s motion to dismiss is GRANTED in part. Plaintiff shall file an amended complaint within thirty days of the issuance of this opinion.
IT IS SO ORDERED.
s/Marian Blank Horn MARIAN BLANK HORN Judge
Notes
[1] In its complaint, Threshold explains that although it brings suit under the name Threshold Technologies, Inc., Threshold is “also referred to as Threshold Aviation Group,” a nd represents that there is no difference between the entities.
[2] Plaintiff confuses its breach of express contract claim with its claim for relief as a third party beneficiary to the prime contract. As discussed below, these are not the same legal theories.
[3] Another subcontractor to the same prime contract between Flight Test Associates and NASA, contract NNC11BA04B, New Hampshire Flight Procurement, LLC (New Hampshire), also brought a suit alleging that NASA failed to compensate New Hampshire for supplying the Gulfstream jet which Threshold, as a subcontractor, helped maintain under the “High Ice Water Content testing” prime contract between Flight Test Associates and NASA. See New Hampshire Flight Procurement, LLC, v. United States, No. 13-567C (Fed. Cl. filed Aug. 9, 2013). The lawsuit in the New Hampshire case was filed by the same attorney and the briefs filed in both cases closely resemble each other, with factual differences noted, but arguments and case citations closely parallel each other. In the New Hampshire case, defendant filed a motion to dismiss for lack of subject matter jurisdiction and for failure to state a claim upon which relief may be granted.
[4] The parties have not provided the entire prime contract between Flight Test Associates and NASA to the court. Rather, plaintiff, Threshold, provided in its complaint Parts I through III of the prime contract NNC11BA04B, the contract “SCHEDULE,” “CONTRACT CLAUSES,” and “LIST OF DOCUMENTS, EXHIBITS AND OTHER ATTACH.” (capitalization in original). Defendant also prov ided, as part of its motion to dismiss, “Attachment A” to the prime contract, titled “Statement of Work (Change A) for Aircraft Services to Conduct High Ice Water Content Flight Research.”
[5] New Hampshire, in a separate complaint filed in this court, No. 13-567C, asserts it was the entity that contracted with Flight Test Associates to supply the aircraft, through a separate subcontract, an aircraft lease agreement New Hampshire signed with Flight Test Associates. See Compl. ¶ 20, New Hampshire Flight Procurement, LLC, v. United States, No. 13- 567C (Fed. Cl. filed Aug. 9, 2013). Defendant admits that, “[t]he prime contract incorrectly identifies Threshold as the provider of the aircraft,” and explains that Threshold only provided “operations, maintenance, and installation services.”
[6] The operating agreement between Threshold and Flight Test Agreement indicates that Threshold, separately, “contracted with NHFP [New Hampshire Flight Procurement] (‘TT I /NHFP Contract’) to accomplish the NHFP Aircraft maintenan ce and support services required of NHFP under the Aircraft Lease Agreement.” The operating agreement between Threshold and Flight Test Agreement states that, “TTI [Threshold Technologies, Inc.] shall not invoice FTA for any goods and/or services that are the responsibility of NHFP under the Aircraft Lease Agreement, or are to be provided by TTI under its agreement with NHFP that supports the Aircraft Lease Agreement.”
[7] Defendant, in support, submitted a letter from a Mr. Mark DiLullo, to Ms. Huth, stating that “N81RR departed KMHV arrived KCNO on 11/3/2012.” As understood from the operating agreement between Threshold and Flight Test Associates, N81RR is the registration identification for the Gulfstream G-1159 airplane leased to Flight Test Associates by another subcontractor, New Hampshire. T he acronym “KMHV” refers to Mojave Airport, in Mojave, California, see Mojave, CA , Weather.gov, Nat’l Weather Service, http://w1.weather.gov/xml/current_obs/KMHV.xml (last updated Aug. 29, 2014), and “KCNO” refers to Chino Airport in Chino, California. See Chino Airport, Cnty. of San Bernardino Dep’t of Airports, http://cms.sbcounty.gov/airports/Airports/Chino.aspx (last visited Aug. 29, 2014).
[8] Defendant ’s counsel, who defended both the Threshold and New Hampshire complaints on behalf of the government, in its motion to dismiss Threshold’s complaint makes numerous references to the other subcontractor, New Hampshire. For example, d efendant states, “[t]his Court does not possess subject matter jurisdiction to entertai n NHFP’s [New Hampshire Flight Procurement’s] complaint for unpaid rent for its aircraft and related costs. As demonstrated below, there is no privity of contract between the Government and NHFP, ” although New Hampshire ’s relationship with the government is not at issue in this case. These appear to be drafting mistakes, in which plaintiff copied language from its motion to dismiss New Hampshire’s complaint in the related case New Hampshire Flight Procurement, LLC, v. United States, also before this court for review.
[9] The court in Flexfab also wrote: “B y requiring an authorized government contracting officer to be engaged in the creation of enforceable obligations under these section 8(a) contracts, we better equip the government to insure that contracting parties comply with the regulations pertaining to their participation in the program .” Flexfab, L.L.C. v. United States,424 F.3d at 1263 – 64.