January 2, 1996
Appeal of
BANKS TRUCKING
Under Contract No. HCR 955AR
PSBCA No. 3528
APPEARANCE FOR APPELLANT:
Harry Pascuzzi, Esq.
APPEARANCE FOR RESPONDENT:
Mark Brent Ezersky, Esq.
OPINION OF THE BOARD
Respondent, United States Postal Service, awarded Appellant, Banks Trucking, a contract to transport mail from the plant of a major mailer in Fortuna, California to a Postal Service facility in Oakland, California. The mailer and Respondent’s local administrative official, the Fortuna Postmaster, insisted that Appellant perform service not required under the contract, and Appellant complied. Appellant tried to obtain an amendment to the contract to reflect the actual service and to compensate it for providing the additional service but was unsuccessful. Tensions rose between Appellant and Respondent, and eventually one of Appellant’s principals used profanity while roughly unloading equipment at the mailer’s plant and became involved in a shouting match with the Fortuna Postmaster. Based on those incidents, Respondent default terminated Appellant’s right to perform, and Appellant has appealed that termination.
A hearing was held, and the parties have filed briefs. The parties have stipulated to the amount of Appellant’s recovery should it prevail on entitlement.
FINDINGS OF FACT
1. On January 4, 1993, Respondent awarded Appellant Contract No. HCR 955AR for the transportation of mail from the plant of a major mailer, Humboldt Printing, in Fortuna, California, to the Oakland General Mail Facility and the return of trailers and empty mailing equipment to the mailer at a price of $450 for each round trip. The Fortuna Postmaster was the administrative official under the contract. (Transcript pages (“Tr.”) 24-26, 65, 67, 490; Appeal File (“AF”) C-20[1]; Appellant’s Exhibit (“AX”) 4, p. 14; Stipulation dated January 13, 1995 (“Stip.”) 1).
2. The Changes clause of Appellant’s contract provided that changes to the service requirements that resulted in an increase or decrease to Appellant’s annual compensation of more than $1000 per year “. . . may be made if the terms of the change, including increases or decreases in compensation, are agreed to by the Contracting Officer and the Contractor. Such changes shall be executed on Form 7406, Amendment to Transportation Services Contract.” (AF B-8, Basic Surface Transportation Services Contract General Provisions, PS Form 7407T, March 1989 (“General Provision”) 12 (a); Stip. 2).
3. The contract authorized the contracting officer to terminate Appellant’s contract for default “[i]f the Contractor is the subject of administratively determined violations of the Postal laws and regulations and other laws related to the performance of the service . . . [or] . . . [i]f the Contractor or a partner, if the Contractor is a partnership, . . . is not reliable, trustworthy or of good character.” (AF B-8, General Provision 16 (a)(2) and (a)(7)(c); Stip. 3).
4. The contract also provided that if after a default termination it were determined that the contractor was not in default, the rights of the contractor would be as if the contract were terminated under the Termination for Convenience clause of the contract. If Appellant’s termination were converted to one for convenience, Appellant would be entitled to an indemnity payment of $93,600. (Tr. 9; AF B-8, General Provision 16 (c), 17, 12 (d); Stip. 3).
5. The service required by the contract failed in a number of significant respects to meet the needs of Humboldt Printing (Tr. 102, 197, 248-249, 276, 401-403, 490-495, 515, 563-565; AF C-15, D-26, D-32, D-37; AX 4). The schedule did not provide the number of trips and flexibility Humboldt Printing needed. (Tr. 96, 100, 109-112, 219, 237-239, 513, 564-565, 574; AF B-8, D‑34). Additionally, Humboldt Printing required trailers to be left at its plant so it could unload the returned equipment and load the trailers with mail at its convenience. The parties understood the contract to provide that the trailers would be loaded in the fifteen minutes before their departure from the mailer’s plant and that the empty mailing equipment would be unloaded within fifteen minutes after their return, leaving the trailers to Appellant’s use for the nonscheduled periods. (Tr. 55, 106-108, 283, 330, 448-450, 580; AF D-14; AX 4, p. 30).
6. Humboldt Printing’s actual requirements had been in effect since before award of Appellant’s contract, but Appellant first learned of them at a meeting with the mailer and Fortuna Postal Service officials after award but before the scheduled start date of February 6, 1993. (Tr. 52-54, 109, 112-113, 261-262; AF D-30).
7. The Fortuna Postmaster and Humboldt Printing officials told Appellant that it was required to meet Humboldt Printing’s needs, and Appellant did so at an additional cost of greater than $1,000 per year. (Tr. 100-101, 105, 109, 111, 158, 187, 195-196, 213, 215, 218, 220, 240-244, 248-255, 267, 307-310, 346-348, 496-497, 503, 511-514, 518, 524-525, 576, 588, 590-592, 595, 602; AF D-21, -32, -44, ‑50).
8. Appellant promptly notified Respondent, including its contracting officials, that performing the changed service increased its costs of performance. Over several months Appellant repeatedly tried to get the contracting officer to negotiate a change to the contract. The contracting officer did not respond to Appellant’s efforts or to direct requests by the Fortuna Postmaster and Humboldt Printing officials that he amend the contract. (Tr. 101, 120-122, 200-201, 220, 239-244, 256, 269-272, 275-276, 278-282, 320, 330, 346, 481, 493-496, 513, 522-526, 538-540, 588, 610; AF C-15, D‑14, ‑16, -17, -19, -20, -21, -25; Stip. 6).
9. In May, a partner in Appellant, John Banks, Sr., met with two members of the contracting officer’s staff to explain Appellant’s claim for additional compensation. Mr. Banks was upset, and, although occasionally swearing (“damn” and “hell”) and raising his voice during the course of the meeting, he did not direct his swearing at the staff members or threaten them, and he later apologized for swearing. (Tr. 322-328, 347, 534, 606-608).
10. On June 3, 1993, a meeting was held in Fortuna between the Fortuna Postmaster, the Plant Manager of the Oakland General Mail Facility, a representative of Humboldt Printing and Appellant. In May, the contracting officer had unilaterally imposed new schedules for the route, and one purpose of the meeting was to address compliance with those schedules. An audio tape of that meeting was admitted into evidence. Appellant correctly pointed out that the new schedules had not been implemented by a negotiated change to the contract and that it was, therefore, not bound by the contract to perform them. The Oakland Plant Manager advised that if Appellant did not perform according to the new schedules, Appellant would be written up on PS Form 5500, Contract Route Irregularity Reports, that could be a basis for adverse action under the contract. The threat was unmistakable that unless Appellant performed the new schedules, his contract was in jeopardy. (Tr. 78, 79, 80, 103, 117, 146, 168, 264, 342, 527, 536-537, 569, 646; AF C-12, -21, D-21, -40, -46, -47, -48; AX 3).
11. At the meeting, Mr. Banks expressed his disappointment at the contracting officer’s failure to negotiate regarding an adjustment for the new schedules and other service changes Appellant was performing. His frustration was evident, and although he sometimes raised his voice and occasionally used mild expletives, Mr. Banks was under control and reasonable.[2] At the June 3 meeting, Mr. Banks agreed to continue performing according to the requirements of Humboldt Printing, but he stated he would revert to performing the contract exactly as it was written and awarded unless within the next two weeks he saw some evidence of a willingness on the part of the contracting officer to negotiate in good faith. At the end of the meeting all participants were friendly, businesslike and professional. (Tr. 117, 245-247, 264, 527, 569; AF C-21, D-47; AX 1).
12. By letter dated July 1, 1993, the contracting officer advised Appellant that,
“[s]ince no modification have [sic] been made to the contract, Mr. Banks should comply with the requirements of the contract that he signed. Mr. Banks should be aware that modifications to the contract including the contract schedule can only be made through this office on my authority.”
The contracting officer concluded the letter,
“Please be advised that under no circumstances will Mr. Banks be allowed to verbally abuse or threaten me or any members of my staff. It has been reported on two (2) occasions that he has utilized loud profane language toward individuals who are only attempting to perform their duties. Please ensure that it does not happen again.” (AF A-9, D-29).
13. A month after the June 3 meeting, Appellant reverted to the schedule as included in the original contract and withdrew the trailers it had been dropping at Humboldt Printing for preloading, insisting that the trailers be loaded and unloaded within fifteen minutes as the parties understood the contract to provide. Humboldt Printing officials and the Fortuna Postmaster were furious. They called the contracting officer, who was not available. They then contacted Dennis Oliver, Manager, Distribution Networks, who managed all transportation operations in California. Mr. Oliver had some supervisory authority over the contracting officer, although not in the area of contract administration. (Tr. 103, 123, 158-159, 214-215, 517; AF D‑45; AX 4, pp. 5-6, 10).
14. On July 6, 1993, at the direction of Mr. Oliver, a contract transportation specialist, who had not previously been associated with this contract, called Mr. Banks and asked to negotiate a lump-sum rate for leaving the trailers at the mailer’s plant for thirty days until the contract could be adjusted. Mr. Banks explained the problems caused by the May unilateral changes to the schedule, his additional costs of providing the changed service, and the problems he had had trying to negotiate a change to the contract. He advised that he reverted to strict compliance with the contract to get someone’s attention. (Tr. 461-462, 541-542, 625-626; AF D-45).
15. Based on the transportation specialist’s representation, after she spoke to Mr. Oliver, that Respondent would negotiate with Appellant, Appellant agreed to return the trailers to Humboldt Printing, and it promptly did so. The contract specialist’s detailed report of the conversations with Mr. Banks makes no mention of his using offensive or threatening language or being other than reasonable under the circumstances. Mr. Oliver also spoke to Mr. Banks, and, although the conversation was heated, a reasonable conclusion was reached with Appellant agreeing to perform as required by Humboldt Printing and Mr. Oliver assuring Appellant that it would have an opportunity to negotiate compensation claims with the contracting officer. Mr. Oliver did not indicate he was offended or threatened by Mr. Banks. (Tr. 461, 615, 625; AF D-45; AX 4, pp. 17-19).
16. After not hearing from the contracting officer about a meeting, Mr. Banks again called Mr. Oliver. Mr. Oliver again promised a meeting, and subsequently advised the contracting officer to meet with Appellant to negotiate compensation for the changes in service. (Tr. 461-462, 464, 615; AX 4, p. 21).
17. Finally, the contracting officer held a meeting with Appellant on August 6, 1993, at which Appellant’s principals, including Mr. Banks, explained the effect of the schedule changes and the requirement for leaving trailers at the mailer’s plant. Appellant repeated its request for an adjustment to its compensation for providing the changed service and submitted a supporting cost statement. The contracting officer said Appellant’s request was excessive and concluded the meeting without stating particular objections to Appellant’s cost statement and calculations, without making a counter-offer and without indicating that he would otherwise respond to Appellant’s offer. The contracting officer felt that Appellant should submit another (lower) offer. The contracting officer told Appellant’s principals that Appellant should not have been performing any services other than those specifically set forth in the contract and that if he could not reach agreement with Appellant, he would terminate the contract for convenience. There is no evidence that Mr. Banks swore at the meeting or abused or threatened any Postal Service officials. (Tr. 337-341, 370-371, 372, 408, 443, 448-452, 458, 544-547, 616-617, 620-622; AF C-7, -19, D‑11, -49).
18. On the morning of September 1, 1993, Mr. Banks brought a trailer to Humboldt Printing and insisted that the empty mail equipment on it be unloaded immediately. He began to unload the trailer himself, rolling the equipment off so quickly and roughly that the equipment was banging noisily and cluttering the dock. A Humboldt Printing employee moved the equipment out of the way as Mr. Banks pushed it off the trailer. No one was hurt or threatened by Mr. Banks’ actions, but when he was asked by a Humboldt Printing supervisor “what the f___ he was doing,” Mr. Banks responded angrily and in kind (e.g. “These are my f___ing trailers and I can unload them when I f___ing please.”). After unloading the trailer, Mr. Banks hauled it away. Humboldt Printing’s employees did not feel threatened by or afraid of Mr. Banks. (Tr. 29-32, 34, 36-37, 46, 48-49, 60, 151-152, 634-635, 640; AF A-5).
19. Mr. Banks returned to Humboldt Printing shortly after noon on the same day and began unloading returned empty mail equipment from another trailer at the dock. The trailer had been brought in the night before and had been marked out of service based on concerns of the driver that the trailer was defective. It had been left at Humboldt Printing because it contained empty mailing equipment to be unloaded. Mr. Banks wanted to take the trailer to his yard for inspection and repair, fearing that if he left it, Humboldt Printing employees might load it with mail. Again, Mr. Banks began the unloading himself and rolled the equipment off roughly and quickly. The pieces of equipment were banging into each other and the process was very noisy. No one was hurt or threatened by his actions. (Tr. 29-31, 34, 36-37, 46, 48, 60, 82-83,151-152, 551-555, 634, 638, 640).
20. The Fortuna Postmaster had been advised by Humboldt Printing of Mr. Banks’ actions that morning and was aware that Humboldt Printing management was upset over the incident. When he was called about the second incident, the postmaster immediately went to the plant. When he reached the dock, he and Mr. Banks immediately began a heated argument. Both were angry, shouting and gesturing, neither willing to give an inch. Neither touched the other, and the argument was entirely verbal. Mr. Banks never threatened the postmaster. Mr. Banks stepped off the dock to the apron below and motioned to the postmaster to look at the underside of the trailer, which Mr. Banks thought was defective. The postmaster followed Mr. Banks off the dock and joined him at the trailer, where their heated argument continued. Eventually, Mr. Banks’ son arrived and brought the argument to a halt. Mr. Banks left the premises without further discussion with the postmaster. (Tr. 40-41, 44-49, 90-91, 114-115, 154, 290-291, 294, 389, 396-398, 556, 557, 572, 641-644).
21. Mr. Banks immediately returned to his home in Nevada and had no further role in performing the contract after leaving Humboldt Printing midday on September 1 (Tr. 560, 645).
22. Appellant performed the contract without further incident until September 3, 1993, when the contracting officer orally terminated the contract for default (Tr. 384-385, 645; AF B-1).
23. Although Mr. Banks had, in the past, been warned about his swearing while on Humboldt Printing premises, the prior incidents were minor, and his outbursts of September 1 were not typical. The Humboldt Printing written rules of conduct, which had been given to Mr. Banks at the beginning of the contract, did not mention swearing on the premises, and nothing in Appellant’s contract specifically addressed such conduct. (Tr. 38, 45, 50-51, 98, 114, 142, 149, 166-167, 263; AF B‑2, -6, C-15).
24. The basis for the termination for default, as stated in the contracting officer’s September 23, 1993 final decision, was Appellant’s alleged violation of General Provisions 16 (a)(2) and 16 (a)(7)(C) (Finding 3), “because of your verbal abuse and threats to Humboldt Printing employees and Postal Service employees.” The contracting officer was especially worried about the Fortuna Postmaster who, the contracting officer believed, would not back down from confrontation (Tr. 395, 479; AF A-2; Stip. 8).
25. Appellant filed a timely appeal from the termination for default (AF A-1; Stip. 9).[3]
DECISION
Respondent argues that the termination for default was justified by Mr. Banks’ repeated hostile, abusive and threatening conduct toward Postal Service and Humboldt Printing employees that culminated in the argument with the postmaster on September 1. It argues that if Appellant had a disagreement with Respondent regarding compensation for the service it was performing, it should have filed a claim pursuant to the contract’s Claims and Disputes clause. Respondent further argues that any imperfections in the contract or its administration by Respondent’s officials would not have justified the alleged abusive conduct by Mr. Banks.
Appellant argues that the tension between Mr. Banks and Respondent’s officials stemmed from Respondent’s award of a contract that failed to meet the needs of Respondent’s important and demanding customer, pressure on Appellant to meet the needs of the customer notwithstanding the absence of a contractual requirement to do so and the contracting officer’s indifference to the problem and refusal to negotiate an adjustment to Appellant’s compensation. Appellant argues that the growing frustration of Mr. Banks was understandable as Appellant was forced to absorb the additional costs of performing as Humboldt Printing wanted, yet the contracting officer would not negotiate in good faith regarding an amendment to the contract and an increase in compensation. Appellant argues that Mr. Banks was provoked on September 1 and that his conduct does not support a default termination of the contract. Further, Appellant contends that those making the decision to terminate the contract for default did not obtain complete and accurate information regarding the September 1 incidents and that they seized on those events as a convenient and cost-free, but unjustified, way to rid Respondent of what the officials considered a troublesome contractor.
A default termination is a drastic sanction that should be sustained only when based on reasonable grounds and solid evidence, and it is Respondent’s burden to demonstrate by a preponderance of the evidence that the default termination of Appellant’s contract was justified by Mr. Banks’ conduct. See Lisbon Contractors, Inc. v. United States, 828 F.2d 759, 765 (Fed. Cir. 1987); J.D. Hedin Constr. Co. v. United States, 408 F.2d 424, 431 (Ct. Cl. 1969); Patricia J. Stevens, PSBCA No. 3272, 94-1 BCA ¶ 26,419 recon. denied, 94-2 BCA ¶ 26,951; Douglas Cremer, PSBCA No. 3108, 93-2 BCA ¶ 25,565. Respondent has not met that burden.
Respondent relies on two provisions of the contract’s Termination by the Postal Service for Default clause as the grounds for the termination. One is General Provision 16 (a)(7)(C), and to justify the termination under that clause, Respondent must demonstrate that Mr. Banks, a partner in Appellant, was “not reliable, trustworthy or of good character.” (Finding 3). We addressed this provision in Contract Master Services, Inc., PSBCA No. 273, 1978 WL 2523, February 28, 1978, as follows:
“We first consider the latter paragraph which allows termination of a contract for default if the contractor is 'not reliable, trustworthy, or of good character.' These are ordinary words the meaning of which is plain. The word 'reliable,' when applied to a person, means one who can be counted upon to do what is required or expected. 'Dependable' or 'trustworthy' are synonyms which express the characteristic of reliability in a person. A person is trustworthy when his or her integrity and truthfulness can be taken for granted. 'Good character' refers to the moral quality of a person, one whose character is as it should be and morally sound, hence who will do what is right and his or her duty. WEBSTER'S NEW WORLD DICTIONARY OF THE AMERICAN LANGUAGE (College Ed., 1962), . . . . Court decisions occasionally provide similar definitions of the terms: one who is trustworthy or worthy of confidence is reliable (Gwinn v. Daly, 300 Ill. 273, 133 N.E. 290 (1921)), he is one to be depended upon to act properly. Allen v. Earnest, 145 S.W. 1101 (Tex. Civ. App. 1912).”
There is no suggestion that Mr. Banks is other than trustworthy or reliable, so the issue is whether Mr. Banks’ conduct demonstrates that he is not a person of good character. There is no question that Mr. Banks sometimes raises his voice and occasionally swears. However, based on the record, including the audio tape of the June 3, 1993 meeting and observation of Mr. Banks at the hearing, we do not find that Respondent has demonstrated that Mr. Banks is not of good character within the meaning of the contract.
In the June 3 meeting, Mr. Banks was obviously upset but remained under control and discussed the issues in a reasonable fashion. His later contacts with the contract specialist and with Mr. Oliver on or about July 6 (Findings 13-16) also reflect a person who was frustrated and upset but who was able to discuss the issues and come to a reasonable accommodation with Respondent notwithstanding that a dispute remained between the parties. There is no evidence that Mr. Banks ever threatened anyone or, with the possible exception of his September 1 encounter with the postmaster, that he ever directed his swearing at anyone. Some who heard his swearing were offended by it and some were not.
Mr. Banks’ use of profanity on the morning of September 1 seems to have been an in-kind response to a crude inquiry from a Humboldt Printing employee (Finding 18). That outburst was not typical of Mr. Banks’ behavior, and, while certainly not appropriate for use at a customer’s plant, under the circumstances of this appeal, we do not find it a basis for termination for default.
Regarding the incident later that day, Respondent has not demonstrated that Mr. Banks was any more than an equal participant in the argument with the postmaster, whose arrival precipitated the incident. The postmaster was certainly not intimidated by Mr. Banks--he followed Mr. Banks down from the dock to look at the trailer and continued the argument on the apron. The testimony of those who observed the incident indicated that neither man gave an inch. Nevertheless, there was no physical contact between the two. While not condoning Mr. Banks’ use of profanity and participation in the September 1 argument, we do not find his conduct to be sufficient to indicate that he is not of good character such that the termination of Appellant’s contract would be justified.[4]
The contracting officer also based the termination on contract General Provision 16 (a)(2). That provision authorized termination for default if Appellant had been “the subject of administratively determined violations of the Postal laws and regulations and other laws related to the performance of the service.” (Finding 3). The opinions in Arthur Napier, PSBCA Nos. 3044, 3410, 94-2 BCA ¶ 26,695, Eddy M. Acevedo, PSBCA No. 3217, 93-1 BCA ¶ 25,493, and Pascal Redfern, PSBCA No. 1512, 87-1 BCA ¶ 19,646, in which the contractors’ objectionable conduct toward others played a part in the justification of their default terminations, identified the Postal Service regulation appearing at 39 C.F.R. § 232.1 (e) as the regulation violated. That provision bars disorderly conduct or conduct that impedes or disturbs Respondent’s employees in the performance of their duties or the public in its obtaining of postal services. Mr. Banks’ conduct has not been shown to have violated the requirements of 39 C.F.R. § 232.1 (e), and Respondent has pointed to no other law or regulation that Appellant violated. Therefore, the termination could not be sustained on the basis of General Provision 16 (a)(2).
Throughout the seven months of the contract, Appellant tried to work with Respondent to satisfy Humboldt Printing’s needs despite the failure of the contract and the contracting officer to address those needs. Appellant tried to negotiate with the contracting officer and was repeatedly rebuffed. That Mr. Banks became frustrated is not surprising. In this proceeding, Respondent presented no explanation why for months the contracting officer and his staff made no effort to address the serious inadequacies of a contract that was supposed to serve an important customer of the Postal Service and ignored the repeated pleas of Appellant, the Fortuna Postmaster and representatives of Humboldt Printing to amend the contract. It was only after being told twice by his superior do so that the contracting officer finally met with Appellant, and even then there was no evidence of good faith negotiating by the contracting officer.[5]
The appeal is sustained, and the termination for default is converted to a termination for convenience. Appellant is entitled to payment of $93,600 as the indemnity under the contract for a termination for convenience plus interest as provided under the Contract Disputes Act.
Norman D. Menegat
Administrative Judge
Board Member
I concur:
James A. Cohen
Administrative Judge
Chairman
I concur:
James D. Finn, Jr.
Administrative Judge
Vice Chairman
[1] Four separate files of documents were admitted into the record. They were referred to at the hearing and will be referred to herein as appeal files A, B, C and D, with the number following the letter (e.g., C-15) indicating the tab of the identified appeal file.
[2] His swearing at that meeting, said by the Fortuna Postmaster to be typical of his experience with Mr. Banks (Tr. 264), was similar to Mr. Banks’ occasional use of the words “damn” and “hell” during his testimony at the hearing when recounting his conversations with Respondent’s officials.
[3] The parties settled an appeal, PSBCA No. 3693, which dealt with Appellant’s claim for additional compensation related to the service it performed beyond the requirements of the contract.
[4] In Marvin K. Reese, PSBCA No. 3139, 92-3 BCA ¶ 25,188, relied on by Respondent, the default termination was based on the contractor’s performance deficiencies and his failure to comply with an explicit direction of the contracting officer, a circumstance covered by General Provision 16 (a)(3), which was not urged by Respondent in this case. The contracting officer’s letter of July 1, 1993 (Finding 14), did not suggest that Mr. Banks’ swearing could be the basis for termination of the contract for default.
[5] We need not address whether this inexcusable indifference to the problems under the contract constituted a provocation that could have excused a violation of contract requirements because we find that Mr. Banks’ conduct did not justify the default termination.