March 12, 1996
Appeal of
ELIZABETH AKOUBIAN
Under Contract No. 056936-87-S-0275
PSBCA No. 3813
APPEARANCE FOR APPELLANT:
Larry Rothman, Esq.
APPEARANCE FOR RESPONDENT:
Robyn M.A. Sembenini, Esq.
OPINION OF THE BOARD
Appellant, Elizabeth Akoubian, has appealed from a final decision of the contracting officer denying her claim for relief from liability for a burglary loss suffered by the postal unit she operated under a contract with Respondent, United States Postal Service. Appellant claims that she is not liable to Respondent for the loss under the contract and that, accordingly, Respondent should return a payment it received from her bonding company on account of the loss.
A hearing was held. Respondent filed a post-hearing brief. Appellant filed a pre-hearing brief setting forth her arguments but did not file a post-hearing brief.
FINDINGS OF FACT
1. On June 17, 1985, Respondent awarded Appellant an indefinite‑term contract to operate a contract postal unit (“CPU”) in Appellant’s delicatessen located in a multiple‑tenant building in Fountain Valley, California (Transcript of Hearing, Page (“Tr.”) 44, 48, 57-58; Appeal File, Tab (“AF”) 1; Appellant’s Exhibit (“AX”) 2).
2. Respondent provided the supplies, including stamps, and equipment necessary to operate the CPU. General Provision 16 of the contract provided,
“Once supplies are delivered, you [Appellant] are responsible for any loss or damage to them (except for supplies that are used up during the work or suffer from normal wear and tear). When the contract ends, you must return any leftover supplies.” (Tr. 26-28; AF 1, General Provision 16).
Monies received by the CPU from its sales of postage remained the property of the Postal Service, and Appellant was accountable to Respondent for such funds (AF 1).
3. As required by the contract, Appellant provided a performance bond under which the bonding company was obliged to pay Respondent up to the penal sum of the bond unless Appellant fully performed her duties under the contract and accounted for all monies and stamps furnished by Respondent. (Tr. 29, 52; AF 1, 2).
4. Between the time Appellant’s business closed on January 3, 1992, and its opening on January 4, unknown persons broke into the delicatessen through a roof vent. They stole cash, cigarettes and beer from the delicatessen, and entered the CPU where they broke into the unit’s safe and removed the contents. (Tr. 6, 48-50, 54; AF 3, pp. 2‑12).
5. An audit of the cash and stock of the CPU on January 4, 1992, revealed a shortage of $11,667.25 (AF 3, pp.13‑18).
6. In the June 24, 1993 Postal Bulletin, Respondent added language to Handbook AS-707-F, Contracting for Contract Postal Units, that addressed the liability of CPU operators for loss of Postal Service stamp stock and property. The stated purpose of the revision was to resolve ambiguities in the law applicable to such losses “by plainly stating that if contractors do not exercise due care . . . , they will be liable for any loss or damage.” (AF 10, p. 3).
7. The new regulation read,
“4.3.5 Loss (New)
The contractor is liable for loss of or damage to Postal Service monies or property, unless he or she can show compliance with all contract terms and provisions. However, if the theft is caused by the contractor’s employees, the contractor is fully liable for the loss or damage regardless of other circumstances (see Clauses OB‑595, Security, OB‑807, Liability, and 2‑12, Postal Service Property‑‑Short Form).
Clause OB‑807, Liability (June 1993) (New: placed in Section B, Specifications/Statement of Work)
The contractor assumes the risk of, and will be responsible for, any loss of or damage to Postal Service monies and property, except when the contractor can show (1) that the losses resulted from acts or omissions of third parties other than employees, and (2) that the contractor complied with all of the security requirements contained in this contract, and the losses occurred despite that compliance.” (AF 10, p. 3).
This provision was never added to Appellant’s contract by written amendment (Tr. 30).
8. By letter dated June 28, 1994, the contracting officer demanded that Appellant pay the Postal Service $11,667.25 for the shortage discovered after the burglary. A copy of the demand letter was sent to Appellant’s bonding company. (AF 4, 5).
9. On September 15, 1994, Appellant’s bonding company paid Respondent $11,667.25. The bonding company then demanded that Appellant reimburse it for the payment. (Tr. 9; AF 6-9).
10. The bonding company sued Appellant in state court to recover the amount of its payment to Respondent based on what it claims to be Appellant’s agreement, given as part of the application for the bond, to indemnify the bonding company for payments made under the bond. That case is still pending. (Tr. 9, 56-57; AX 1).
11. By letter dated December 2, 1994, Appellant advised the contracting officer of her view that she should not be held liable for the loss and demanded that Respondent return the payment to the bonding company (AF 10).
12. On December 22, 1994, the contracting officer, in a final decision, advised that Appellant was liable for the loss under the contract because Appellant had failed to secure an access ladder used by the burglars to gain access to the roof (Tr. 15-16, 18, 21-24; AF 12). This appeal followed (AF 15).
13. The cash and stamp stock were properly secured in the contract unit’s safe the night of the burglary. The burglars were not Appellant’s employees, and Appellant had complied with all of the security requirements contained in the contract. (Tr. 6-7, 45, 47-50, 55-56, 59-60).
DECISION
Respondent argues that Appellant is strictly liable under the contract for any loss of Postal Service stock and supplies. It contends that the liability provision in the June 24, 1993 Postal Bulletin does not apply in the circumstances of this appeal because the revision was not published until after Appellant’s contract was entered into and after the burglary loss.
Appellant argues that she exercised reasonable care in operating the CPU and securing the stamp stock and cash. For that reason, according to Appellant, she should not be held liable. Additionally, she argues that the June 24, 1993 Postal Bulletin article establishes the standard for her liability and that she is not liable for the loss because she took all reasonable precautions for the security of the CPU. Appellant contends that because she is not liable under her contract, Respondent’s retention of the payment from her bonding company was improper. Appellant asks the Board to direct Respondent to return the payment so that the bonding company will end its efforts to collect from her.
Under the contract as awarded, Appellant is strictly liable to Respondent for any loss of Postal Service stamp stock and money entrusted for the operation of the CPU. Robert A. and Sandra B. Moura, PSBCA Nos. 3460, 3622, 96-1 BCA ¶ 27,956; John W. Bradbary, PSBCA No. 3126, 93-2 BCA ¶ 25,563; Clines Office Products, PSBCA No. 3045, 92-1 BCA ¶ 24,725; see United States v. Seaboard Machinery Corp., 270 F.2d 817 (5th Cir. 1959), cert. denied, 362 U.S. 941 (1960). In Clines Office Products, the Board found the contractor strictly liable for a burglary loss at a CPU under a contract with the same liability provision as that in Appellant’s contract (Finding 2).
In Maude Ellen Thacker, PSBCA No. 2923, 92-3 BCA ¶ 25,093, the Board denied a Postal Service motion for summary judgment on a claim against the contractor for a burglary loss at a CPU because of a possible ambiguity between the liability provision of the contract and a clause setting forth specific security requirements. The former would mandate strict liability for the contractor while the latter could be read to establish compliance with specific security requirements as sufficient to avoid liability. In Maude Ellen Thacker, however, there was a question whether the contractor when entering the contract might have reasonably relied on its interpretation of the specific security requirement to establish the lower standard of liability. There is no suggestion that Appellant relied on a security provision in interpreting her contract to hold her liable only if she failed to comply with the security requirements. In fact, Appellant testified that the form of contract she was provided did not even contain the specific security provision at issue in Maude Ellen Thacker. Therefore, under her contract as written, Appellant is liable for the loss, and her exercise of reasonable care would not be a basis for avoiding liability.
The June 24, 1993 Postal Bulletin revision (Findings 7, 8) establishes a different accountability standard. Under the revised regulation, a contractor would not be liable for a burglary loss if he or she can show compliance with all contract security requirements and that the loss was caused by third parties, not employees of the contractor. The evidence in the record demonstrates that Appellant met all of those conditions and, thus, would not be directly liable to Respondent under the revised standard if, as Appellant argues, it applies to the 1992 burglary loss at her CPU.
Generally, new regulations will be applied prospectively only to events which occur after issuance of the regulation unless a retroactive application is clearly mandated by the regulation’s issuer. Lockheed Aircraft Corp. v. United States, 426 F.2d 322, 327-328 (Ct. Cl. 1970); Shopco Distribution Co., aka Shopco Publishing and Printing, ASBCA No. 37861, 93-2 BCA ¶ 25,683 at 127,770. Appellant has not shown that the June 24, 1993 revision was intended to have retroactive effect. See Havelock Progress Publishing Co., ASBCA No. 33975, 87-3 BCA ¶ 20,124, aff’d 864 F.2d 149 (Fed. Cir. 1988)(Table). The regulation itself does not express an intent that it be applied retroactively, and there is no evidence in the record that Respondent intended the new standard to apply to losses already suffered under contracts that predate the revision and contain provisions that establish strict liability. Appellant’s contract was never amended to include the new Liability clause (Finding 7) published in the Postal Bulletin article. Therefore, the extent of Appellant’s liability was established by the contract, and Respondent’s delay in collection until after issuance
of the new regulation does not affect its ability to recover for the loss on a strict-liability basis.
The appeal is denied.
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