Hcic Enterprises, LLC v. United States ( 2020 )

In the United States Court of Federal Claims
No. 18-1943C
(Filed: July 9, 2020)
)
HCIC ENTERPRISES, LLC, )
d/b/a HCI GENERAL CONTRACTORS, )
) Keywords: Motion to Amend; Futility;
Plaintiff, ) Bad Faith; Contracting Officer Final
) Decision
v. )
)
THE UNITED STATES, )
)
Defendant. )
)
)
Frank V. Reilly, Fort Lauderdale, FL, for Plaintiff.
Robert C. Bigler, Trial Attorney, Commercial Litigation, Civil Division, U.S. Department of
Justice, Washington, DC, for Defendant, with whom were Steven J. Gillingham, Assistant
Director, Robert E. Kirschman, Jr., Director, Joseph H. Hunt, Assistant Attorney General.
OPINION AND ORDER
KAPLAN, Judge.
Plaintiff HCIC Enterprises, LLC (“HCIC”) has filed a second motion to amend its
complaint. For the reasons set forth below, the motion is denied.
BACKGROUND
I. Relevant Facts 1
The Court’s prior opinions granting the government’s motion for partial summary
judgment and denying HCIC’s first motion to amend its complaint contain a comprehensive
discussion of the background of the present motion. See HCIC Enters., Inc. v. United States, 147
Fed. Cl. 118, 121–23 (2020); ECF No. 32 (order denying motion to amend complaint). To briefly
recapitulate, on April 20, 2016, the Federal Bureau of Prisons (“FBOP”) awarded HCIC a
contract worth $2,735,000 to replace roofs on some of the buildings at the Federal Correctional
Institute (“FCI”) in Estill, South Carolina. Def.’s Cross Mot. for Partial Summ. J. & Resp. to
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The facts set forth in this section are drawn from the parties’ pleadings and documents
submitted in connection with the earlier motions filed in this case.
Pl.’s Mot. for Summ. J. App. (“Def.’s App.”) at 70, ECF No. 14-1 (February 14, 2019
Determination and Findings Authorizing Contract Termination for Default). Under the contract,
the repairs were to be completed within one year. The contracting officer (“CO”) issued a notice
to proceed on June 13, 2016, setting a completion date of June 13, 2017. Id.
The performance period was subsequently extended through four bi-lateral contract
modifications—first by fifty-five days, then twenty-five days, then 180 days, and finally by 193
days to September 6, 2018. See Initial Compl. Ex. C, at 10–11, ECF No. 1. 2 Despite the
extensions, HCIC failed to complete the work by September 5. Def.’s App. at 74. Instead, on
September 6, 2018, HCIC filed a claim for an equitable adjustment, requesting another extension
of the performance period, this time for 419 days, to October 30, 2019. See Initial Compl. Ex. C,
at 10–12. In its claim, HCIC stated that between December 20, 2017 and September 5, 2018 (the
period covered by the most recent modification of the contract) the project had incurred another
259 calendar days of delays which HCIC attributed to “the inability of the government to provide
adequate staff to escort the necessary HCI[C] crews required to complete the project in the time
allotted in the contract.” Id. at 11. HCIC requested $480,821.74 as compensation for additional
costs incurred. Id. at 12. It also requested an additional award of $777,854.48 to cover its costs
and profit for the additional 419 days it had requested to complete the project. Id.
The CO denied HCIC’s request for an equitable adjustment in a November 14, 2018
email. Id. Ex. D, at 19–20. He noted that the prior extensions “were executed as supplemental
agreements and agreed to bi-laterally.” Id. at 19. Those modifications, he explained, “[were]
considered complete equitable adjustments for each of the associated time periods.” Id. The CO
acknowledged that HCIC was entitled to compensation for twelve days of delay during the most
recent modification period “for time that FCI Estill could not accommodate the contractor” and
that those days “w[ould] not be calculated in the liquidated damages that are currently accruing.”
Id. Finally, the CO observed that HCIC was out of time to complete the project as of the date of
his letter. Id. He advised HCIC that it had not provided information “that compels the
Government to believe that additional adjustments are necessary or appropriate.” Id. at 19–20.
He therefore denied HCIC’s request for a fifth extension of the deadline for completion of the
project. Id. at 20.
On February 13, 2019, two months after HCIC filed the present action, it requested that
the contract be terminated for convenience. Pl.’s Mot. for Leave to File 2d Am. Compl. Ex. B,
ECF No. 29-3 (email exchange from HCIC president to CO seeking contract termination).
Instead, the CO issued a “Determination and Findings Authorizing Contract Termination for
Default” on February 14, 2019. Def.’s App. at 70. FBOP’s Administering Contracting Officer
concurred in the recommended default termination, id. at 78, and the CO issued a Notice of
Termination for Default on April 30, 2019, id. at 67–68.
2
Many of Plaintiff’s exhibits are contained in the same document as the initial complaint. The
page numbers cited for these exhibits reflect the pagination assigned by the court’s electronic
filing system. See Initial Compl., ECF No. 1.
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II. Prior Proceedings
HCIC filed the present action on December 19, 2018. ECF No. 1. In its initial complaint,
HCIC alleged that FBOP “breached the written agreement between the parties by failing to allow
access to the site during normal working hours except during emergencies . . . [,] by failing to
provide access to all roofs designated in the Statement of Work . . . [, and] by improperly
denying HCI[C]’s claim” submitted to the CO. Initial Compl. ¶¶ 9–10, 12. HCIC further alleged
that the CO’s denial of its request for an equitable adjustment was arbitrary and capricious
“because there was no evidence in the administrative record to show that HCI[C] is or was the
sole and proximate cause of the delayed completion date for the project.” Id. ¶ 14. It demanded
an award of $480,821.74 “plus additional damages as will be shown to have been incurred after
the date the claim was filed.” Id. ¶ 19.
On September 9, 2019, and before expiration of the discovery period, HCIC filed what it
later clarified was a motion for summary judgment pursuant to Rule 56 of the Rules of the Court
of Federal Claims (“RCFC”). See HCIC Enters., 147 Fed. Cl. at 123 (clarifying that HCIC
sought a motion for summary judgment notwithstanding that its motion was stylized as a motion
for judgment on the pleadings). The government filed a cross-motion for partial summary
judgment on October 7, 2019 in which it sought a ruling that HCIC’s breach claim was based on
a misinterpretation of the relevant provisions of the contract. Id.
The Court denied HCIC’s motion for summary judgment. Id. at 125. It observed that its
denial was based on HCIC’s failure to identify what undisputed facts supported its claim, and its
inability to “explain how the application of the legal standards it recite[d] entitle[d] it to
judgment as a matter of law.” Id. at 124.
Next, the Court addressed the government’s motion for summary judgment regarding the
interpretation of the contractual provisions upon which HCIC relied. It concluded that the
contractual provisions that promised HCIC would be granted “access” to the worksite and to the
roofs of the buildings at FCI Estill must be read in light of other provisions in the contract which
conditioned such access on compliance with security requirements. Id. at 125. These included the
requirement that workers be escorted “at all times, when entering the institution” and the
prohibition against workers “mov[ing] to other parts of the institution without an escort.” Id.
(quoting Def.’s App. at 55, 56). Under the contract, FBOP only committed to provide two
security escorts for the project. Id. (citing Def.’s App. at 52). As the Court observed, “[t]he
requirement that workers always be escorted when on the premises, coupled with FBOP’s
limited obligation to make only two escorts available for the project . . . meant that the crews
could only work on one roof at a time, with one escort on the roof and one on the ground.” Id. It
therefore granted the government’s cross-motion for partial summary judgment as to that issue of
contract interpretation. Id.
As noted above, one day before the Court issued its opinion on the cross-motions for
summary judgment, HCIC filed an eleventh-hour motion to amend its complaint to delete its
breach of contract claim. It sought to substitute an allegation that the CO’s denial of HCIC’s
requests for equitable adjustment and assessment of liquidated damages violated the
Administrative Procedure Act. See id. at 125–26; Pl.’s Proposed 1st Am. Compl. ¶¶ 110–121,
ECF No. 27-1. Before the government could file a response to HCIC’s first motion to amend,
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HCIC filed the new one that is currently before the Court. Accordingly, the Court denied the first
motion to amend as moot. See ECF No. 32.
III. HCIC’s Proposed Amended Complaint
HCIC’s second proposed amended complaint includes five numbered counts. In Count I,
HCIC challenges the CO’s November 14, 2018 denial of its request for a 419-day extension of
the contract deadline and payment of costs incurred on the grounds that the CO’s decision was
“factually and legally flawed.” 2d Proposed Am. Compl. ¶¶ 218–30, ECF No. 29-1. In Count II,
HCIC challenges what it claims was the CO’s assessment of liquidated damages against it in his
November 14, 2018 letter, again on the grounds that the decision was “factually and legally
flawed.” Id. ¶¶ 231–45. In Count III, HCIC similarly contends that the CO’s February 14, 2019 3
decision to terminate the contract for default was “factually and legally flawed” and also that it
“was made in bad faith.” Id. ¶¶ 246–77. In Count IV, HCIC alleges that the claim the
government has apparently asserted against its performance bond is “based on false facts,” id.,
and that “[a]t the time FBOP filed its false bond claim, FBOP knew full well that HCIC should
not be held responsible for th[e] delays and costs because FBOP did not ‘provide access to all
roofs designated in the Statement of Work’” as the contract required, id. ¶ 265 (quoting Def.’s
App. at 54). Finally, in Count V (which is mis-numbered as a second Count IV), HCIC asserts
that it is entitled to rescind its previous waiver of a potential claim for $182,570.05 based on
additional costs allegedly accrued from September 15, 2017 to December 20, 2017. Id. ¶¶ 278–
89; Initial Compl. Ex. C, at 11. HCIC seeks a total of $1,833,455.49 “plus additional costs that
may be incurred during the pendency of these proceedings against FBOP.” 2d Proposed Am.
Compl. at 37.
DISCUSSION
RCFC 15(a)(2) provides that where, as here, a party can no longer amend its pleading “as
a matter of course,” it may do so “only with the opposing party’s written consent or the court’s
leave.” Although the Court should “freely give leave” to a party seeking to amend its pleading
“when justice so requires,” that principle is not unlimited. Id. “[F]utility of amendment,” among
other things, may justify denial of a motion to amend. Foman v. Davis, 371 U.S. 178, 182 (1962)
(emphasizing also that “the grant or denial of an opportunity to amend is within the discretion of
the [trial court]”).
For the reasons set forth below, the Court concludes that none of the claims set forth in
HCIC’s second proposed amended complaint would survive a motion to dismiss. Because the
proposed amendments of the complaint would be futile, HCIC’s motion to amend is denied.
I. Count I
As noted, in Count I of its proposed amended complaint, HCIC alleges that the CO’s
decision not to extend the contract a fifth time (for 419 days) and not to pay HCIC for costs it
incurred as a result of the most recent delays was “factually and legally flawed,” “was not based
3
Count III states that the decision to terminate was made on February 14, 2018, but this appears
to be a typographical error. See Def.’s App. at 70–78.
4
on a proper analysis of the facts,” and was “legally deficient.” Id. ¶ 224. Count I appears to be
based on the mistaken premise that this Court will be conducting a review of the CO’s decision
to determine whether it is arbitrary and capricious or contrary to law. Under the Contract
Disputes Act (“CDA”), however, the Court does not review the CO’s decision; it conducts de
novo review of the claims that were put before the CO. See Assurance Co. v. United States, 813
F.2d 1202, 1206 (Fed. Cir. 1987); see also 41 U.S.C. § 7104(b) (providing for “de novo” action
in the Court of Federal Claims). Put another way, “once an action is brought following a
contracting officer’s decision, the parties start in court or before the board with a clean slate.”
Wilner v. United States, 24 F.3d 1397, 1402 (Fed. Cir. 1994).
Further, Count I of the proposed amended complaint does not contain sufficient factual
allegations to support HCIC’s claim that FBOP breached the contract by not extending the
performance period a fifth time. As it did when it filed its claim with the CO, HCIC alleges its
performance was delayed because of government action, i.e., FBOP’s failure to supply HCIC
with more than two security escorts, which—in light of security requirements—prevented
HCIC’s crews from working on more than one roof at a time. See, e.g., 2d Proposed Am. Compl.
¶¶ 56, 58 (“FBOP will not allow HCIC to start work on The General Housing Unit # 2 Building
for security reasons . . . because FBOP will only provide 2 security escorts at a time.”); id. ¶¶ 39,
41 (“FBOP did not provide additional escorts as HCI[C] had requested . . . [and] did not allow
HCIC to work on more than one building at a time.”); id. ¶¶ 87, 89 (“FBOP will not allow HCIC
to start work on The General Housing Unit # 3 Building for security reasons . . . because FBOP
will only provide 2 security escorts at a time.”); id. ¶¶ 119, 121 (making identical allegations
relating to the general housing building #4); id. ¶ 152 (same with regard to the camp core
building); id. ¶¶ 181, 183 (same with regard to the outside warehouse garage and powerhouse
storage building). But this Court has already ruled that FBOP was within its rights under the
contract to supply only two escorts to HCIC, and to enforce security requirements that limited
HCIC’s crews to working on only one roof at a time.
HCIC acknowledges in its reply brief that “the proposed amended complaint . . . [is]
based upon the same operative facts as the original claim.” HCIC Reply to Def.’s Objs. to Pl.’s
2d Mot. for Leave to File[] Its Proposed Am. Compl. (“HCIC’s Reply”) at 4, ECF No. 34. It also
recognizes that the Court determined in its earlier decision that, “[a]s a matter of law . . . FBOP
was within its contractual rights to delay the project under the circumstances of this case.” Id. at
3. Nonetheless, HCIC asserts, its proposed amended complaint alleges “an alternative theory of
recovery,” i.e., “that FBOP was not within its contractual rights to deny the claim.” Id. at 4. But
HCIC does not explain the basis for this assertion. And to the extent that its “alternative theory”
concerns the merits of the CO’s reasoning when he denied the claim, its allegations fail to state a
claim because the Court’s review, as noted above, is de novo. Id. The Court concludes, therefore,
that Count I of HCIC’s proposed amended complaint fails to state a plausible claim for relief,
would not withstand a motion to dismiss, and is therefore futile. See Ashcroft v. Iqbal, 556 U.S.
662, 679 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007)) (“[O]nly a
complaint that states a plausible claim for relief survives a motion to dismiss.”); Meyer Grp.,
Ltd. v. United States, 115 Fed. Cl. 645, 650 (2014) (citing Shoshone Indian Tribe v. United
States, 71 Fed. Cl. 172, 176 (2006)) (“An amendment is futile where it ‘would not withstand a
motion to dismiss.’”).
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II. Count II
In Count II, HCIC seeks to amend its complaint to include a challenge to the
government’s alleged assessment of liquidated damages in the amount of $421,768. 2d Proposed
Am. Compl. ¶¶ 233, 245. This claim is not ripe, however, because the government has not
assessed liquidated damages against HCIC. The CO merely stated in denying HCIC’s claim that
such damages continued to accrue. See Initial Compl. Ex. D, at 19 (stating only that “liquidated
damages [] are currently accruing”). He did not make a demand for payment. Since there is
nothing for the Court to review at this time regarding liquidated damages, amendment of the
complaint to include Count II would be futile.
III. Counts III and IV
In Count III, HCIC alleges that FBOP’s decision to terminate the contract for default was
made in bad faith. 2d Proposed Am. Compl. at 31. Relatedly, in Count IV, HCIC alleges that the
government used “false facts” to support its claim against HCIC’s performance bond because
FBOP knew that it had not provided access to all roofs designated in the Statement of Work as
the contract required. Id.
HCIC’s proposed amended complaint does not include sufficient facts to support its
claim that the government terminated the contract for default in bad faith. The Federal Circuit
and its predecessor court, the Court of Claims, “have long upheld the principle that government
officials are presumed to discharge their duties in good faith.” Road & Highway Builders, LLC
v. United States, 702 F.3d 1365, 1368 (Fed. Cir. 2012) (citing Am–Pro Protective Agency v.
United States, 281 F.3d 1234, 1239 (Fed. Cir. 2002)). And “it is ‘well-established . . . that a high
burden must be carried to overcome this presumption,’ amounting to clear and convincing
evidence to the contrary.” Id. (quoting Am-Pro Protective Agency, 281 F.3d at 1239–40).
“Moreover, a challenger seeking to prove that a government official acted in bad faith in the
discharge of his or her duties must show a ‘specific intent to injure the plaintiff’ by clear and
convincing evidence.” Id. (quoting Am–Pro Protective Agency, 281 F.3d at 1240).
HCIC’s allegations do not approach these thresholds. It alleges that “FBOP terminated
the contract . . . because the contracting officer intended to file his false claim on HCIC’s
performance bond . . . to force HCIC and/or HCIC’s surety to pay costs and liquidated damages.”
2d Proposed Am. Compl. ¶¶ 258–59. But there is no factual predicate for this claim which would
permit the Court to find—by clear and convincing evidence no less—that the presumption of
good faith has been rebutted. In fact, HCIC’s underlying theory that the agency terminated the
contract so that it could file a claim against the performance bond using “false facts” is
inherently implausible, given the fact that FBOP repeatedly agreed to extend the contractual
deadline. Moreover, the assertion that FBOP is relying upon “false facts” in making a claim on
the performance bond seems to be grounded in its contention—which the Court has rejected—
that FBOP was contractually obligated to provide it with more than two security escorts.
To the extent that HCIC is pressing a separate claim in Count IV regarding the merits of
FBOP’s claim on its performance bond, it lacks standing to do so. The performance bond is
based on a contract between the government and a third party. Therefore, amendment of the
complaint to add Counts III and IV would be futile.
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IV. Count V
In the final count of the proposed amended complaint, HCIC claims it is entitled to
rescind a previous waiver of damages in the amount of $182,570.05 covering delays and costs
during the period from September 15, 2017 through December 20, 2017. 2d Proposed Am.
Compl. at 35; Initial Compl. Ex. C, at 11. The Court lacks jurisdiction over this claim because it
was never presented to the CO.
Under the CDA, the Court of Federal Claims has jurisdiction over actions filed within
twelve months of a contracting officer’s decision on a claim. 41 U.S.C. § 7104(b). The court of
appeals has held that this Court’s exercise of jurisdiction “requires both a valid claim and a
contracting officer’s final decision on that claim.” M. Maropakis Carpentry, Inc. v. United
States, 609 F.3d 1323, 1327 (Fed. Cir. 2010) (citing James M. Ellett Constr. Co. v. United States,
93 F.3d 1537, 1541–42 (Fed.Cir.1996)); see also Securiforce Int’l Am., LLC v. United States,
879 F.3d 1354, 1359 (Fed. Cir. 2018).
In this case, HCIC submitted a claim to the CO on September 6, 2018. Initial Compl. Ex.
C, at 10. It did not ask to rescind its previous waiver of damages covering delays from
September 15, 2017 through December 20, 2017, or state that it was entitled to an additional
$182,570.05 for that period of time. Id. at 10–12. Instead, it requested an additional 419 days to
complete the work and sought: 1) $480,821.74 representing costs, overhead, and profit for the
delay period from December 20, 2017 through September 5, 2018, and 2) $777,854.48 in costs,
overhead, and profit to cover the period from September 6, 2018 through October 30, 2019. Id. at
11–12. Because HCIC never filed a claim seeking to rescind its waiver of damages for the
September 15, 2017 through December 20, 2017 period, its proposed amendment of its
complaint would be futile.
CONCLUSION
For the foregoing reasons, HCIC’s second motion to amend the complaint is DENIED.
The Court hereby orders HCIC to show cause by Friday, July 24, 2020 why its original
complaint should not be dismissed for failure to state a claim in light of the Court’s opinion
granting the government’s motion for partial summary judgment. See Baptichon v. United
States, 144 Fed. Cl. 676, 683 (2019) (citing Anaheim Gardens v. United States, 444 F.3d 1309,
1315 (Fed. Cir. 2006)) (“[T]he court may dismiss a complaint sua sponte for failure to state a
claim upon which relief can be granted if ‘the pleadings sufficiently evince a basis for that
action.’”).
IT IS SO ORDERED.
s/ Elaine D. Kaplan
ELAINE D. KAPLAN
Judge
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