August 27, 1997
Appeal of
PATRICK R. CARLILE
Under Contract No. HCR 85642
PSBCA Nos. 3868 & 3911
APPEARANCE FOR APPELLANT:
Frank W. Daykin, Esq.
APPEARANCE FOR RESPONDENT:
Robyn M.A. Sembenini, Esq.
OPINION OF THE BOARD
In July 1995, Appellant, Patrick R. Carlile, and Respondent, United States Postal Service, entered into an agreement terminating, at no cost to either party, Appellant's performance under his highway transportation contract. Appellant has now appealed the contracting officer's denial of Appellant's later request that Respondent convert that termination to one for the convenience of the Postal Service and pay the indemnity specified in the contract for a convenience termination. A hearing was held in Reno, Nevada. At the election of the parties, only entitlement is at issue in this proceeding.
FINDINGS OF FACT
1. Contract No. HCR 85642 was awarded to Appellant on October 23, 1993, for the period of November 13, 1993, through June 30, 1997. The contract required Appellant to perform one daily round-trip between Tucson and Douglas, Arizona, with intermediate stops at Hereford and Bisbee, Arizona. Appellant was required to supply a truck equipped with a power lift tailgate with a 2,000 pound capacity. Appellant has been a Postal Service contractor since 1979. (Appeal File Tab (AF) 1, 2; Appendix A to Appellant's brief; Transcript page (Tr.) 8).
2. Under the contract's "Changes" clause, the contracting officer had the right, without consulting with the contractor, to issue orders directing changes in, among other things, the line of travel under the contract, if the resulting change in the contractor's annual compensation would be no more than $1,000 (an "insignificant minor service change"). If the contractor believed the increase in compensation calculated by Respondent was understated, the clause allowed the contractor to request an increase in the compensation for the service change. Service changes other than insignificant minor service changes, which included those changing the cost of performance by more than $1,000, required the agreement of the contractor. Finally, the clause provided for the payment of a specified indemnity to the contractor if the contract were "terminated or curtailed" without the fault of the contractor. (AF 1).
3. The contract's "Termination for Convenience" clause gave the contracting officer the right to terminate the contract when such action was determined to be in the best interest of the Postal Service. The clause referred back to the Changes clause to determine the indemnity due in the case of such a termination. The indemnity specified in the Changes clause for a contract terminated during the first two years was one-third of the annual rate. (AF 1).
4. Clause 15 of the contract general provisions authorized the contracting officer to release the contractor from the contract at the contractor's request "for reasons of physical disability which will prohibit the Contractor from adequately operating the route, or will endanger the Contractor's life if he continues to operate the route." Such a release would not be considered a "termination or curtailment" under the Changes clause and provided that no indemnity would be paid. (AF 1, General Provision 15, "Release of the Contractor").
5. From the beginning of the contract until the end of June 1995, Appellant was able to maintain the contract schedule, with only occasional instances of delayed service. Appellant ran the contract personally for approximately the first year, but thereafter (and during the time period relevant to this dispute) moved back to the Reno, Nevada area and used hired drivers to operate the route. (Tr. 25; AF 3-12).
6. On or about June 27, 1995, Respondent notified Appellant that Respondent intended to change the schedule of Appellant's route, effective July 1, 1995, to add three new stops between Tucson and Hereford on the outbound trip and add the same three stops, but delete Hereford, on the inbound trip. Respondent proposed to add fifteen minutes to both trips and make adjustments to the time allotted for loading and unloading at Tucson and Douglas. Respondent's initial estimate was that the impact on Appellant's contract would be less than $1,000. Therefore, it categorized the change as an "insignificant minor service change" that could be imposed unilaterally without consulting the contractor. (Tr. 49, 50; AF 13).
7. The initial estimate by Respondent's personnel was that the impact of the change would be a $974 reduction in Appellant's compensation. However, the initial calculation was in error, and the impact of the proposed change would have been more than $1,000. Nevertheless, the evidence shows that Respondent's personnel did not realize the existence of the calculation error until just before the hearing in these appeals. (Appellant's Exhibit 2; Tr. 49, 50, 62).
8. Appellant received the full text of the proposed contract amendment on or about July 2, 1995. In addition to schedule changes, the amendment changed the required tailgate lift capacity to 4,000 pounds. (Tr. 29; AF 14).
9. There ensued considerable discussion between Appellant and Respondent's personnel about the feasibility of the new schedule and about its cost impact. After the new schedule was imposed on July 1, 1995, Appellant's driver was late every day or nearly every day. On July 6, 1995, Appellant faxed a letter to the contracting officer, complaining that the new schedule was unworkable and proposing a revision. Appellant also noted that he expected an additional lump sum payment because of the change to the lift tailgate. An earlier estimate secured by Appellant in mid-June indicated the cost to install the larger lift was $5,671. Appellant was never required to install the new lift. Respondent's personnel had concluded that the larger lift gate was not actually needed, but Appellant was not informed prior to contract termination that he would not have to install it. (Tr. 9, 14, 52; AF 18; Appellant's Exhibit 1).
10. Following Respondent's receipt of Appellant's July 6 letter, discussions continued between the parties concerning the cost impact of the new schedule and about its feasibility. On or about July 12, 1995, another revision to the schedule was proposed and implemented by Respondent's personnel. On July 12 and July 14, 1995, route surveys were conducted by Respondent's personnel to examine the feasibility of the new schedule. Route surveys consisted of following the driver along the route to determine whether the schedule was realistic or whether it needed adjustment. (Tr. 49-53, 87; Supplemental Appeal File Tabs (SAF) 15, 16).
11. On or about July 11, 1995, Appellant received what he perceived to be a threatening telephone call from another highway contractor. That contractor had been reported to Respondent by Appellant's driver on one or two occasions for leaving a stop early.[1] The following day, Appellant's driver found a note on the windshield of Appellant's truck warning her to "mind [her] own business." Respondent's Network Specialist at Tucson became aware of the note the next day, when Appellant's driver asked her for the use of a copying machine so that she could make a copy of the note "for handwriting analysis." Although the Network Specialist offered to be of further assistance, her offer was not accepted by the driver and the driver never expressed any concern for her own safety. At some point during this time, Appellant's truck also was vandalized and some minor damage was done. As a result of these events, Appellant became concerned about the safety of his driver and of his truck. (Tr. 15-16, 18-20, 72-73).
12. Following the route surveys, Respondent's personnel remained of the opinion that meeting the proposed schedule was feasible and that the reason Appellant's driver was late every day was that she was driving and working too slowly (Tr. 95). Appellant continued to disagree. As of July 17, 1995, the parties had been unable to agree on the new schedule or the compensation due Appellant. On that date, Appellant and the contracting officer (and his staff) had a telephone conversation to attempt to finally resolve the dispute. During the conversation, the contracting officer offered to conduct a third route survey with Appellant present. The contracting officer told Appellant that if they were unable to agree on a schedule, he would order the latest version into effect unilaterally, and begin holding Appellant responsible for failures to meet the schedule. The contracting officer also told Appellant that if they couldn't agree on a schedule, he would be willing to allow Appellant out of the contract -- i.e., terminate the contract for convenience -- provided Appellant was willing to forgo the payment of the indemnity that he would otherwise be entitled to receive following a convenience termination. Within minutes after the conclusion of that telephone conversation, Appellant called the contracting officer back and stated that he would accept the offer of a convenience termination without the payment of the indemnity. (Tr. 55-60, 95; AF 27).
13. On July 18 and 19, the parties executed a contract amendment stating that the contract was to be terminated pursuant to Clause 15 of the general provisions (see Finding 4) effective July 21, 1995. The amendment expressly stated that the contractor agreed to waive the payment of an indemnity. (AF 29).
14. By letter dated August 9, 1995, counsel for Appellant wrote to the contracting officer appealing "from your amendment effective July 1, 1995" and alleging that Appellant's agreement to waive the payment of an indemnity was ineffective because it had been obtained under duress (AF 34). That letter was docketed as PSBCA No. 3868.
15. In his Complaint, Appellant for the first time expressly claimed entitlement to payment of the indemnity specified in the Changes clause (Finding 2). Action on PSBCA No. 3868 was delayed by agreement of the parties while Appellant wrote to the contracting officer on November 8, 1995, formally requesting that the release under Clause 15 of the contract be converted to one for the convenience of the Postal Service and that the indemnity associated with such a termination be paid. In a final decision dated November 28, 1995, the contracting officer agreed to convert the termination to one for convenience, subject to the understanding that Appellant's agreement to waive the payment of an indemnity would remain in effect. As a result, the contracting officer denied Appellant's claim for the indemnity payment (AF 35). Appellant filed an appeal of that final decision, which appeal was docketed as PSBCA No. 3911.
DECISION
Appellant argues first that his waiver of the indemnity made in connection with the termination of his contract was ineffective because it was made without sufficient knowledge of the circumstances then existing. Specifically, Appellant contends that both parties were unaware of the error that had been made in computing the value of the change that had been imposed on Appellant's contract as of July 1, 1995. Accordingly, Appellant maintains that at the time he agreed to the termination and waiver of indemnity he did so without knowing that, under the Changes clause, the contracting officer did not have the right to implement the change unilaterally. Appellant argues that because he was unaware that he could have refused to implement the proposed change, his waiver of the indemnity was ineffective. Further, Appellant argues that because his ignorance was caused by Respondent's erroneous statements as to the value of the change, Respondent is estopped to argue that Appellant should have known the truth or that he effectively waived payment of the indemnity.
Appellant also argues that even if he knowingly waived the indemnity, such waiver was ineffective because it was the product of duress. Appellant identifies as the source of the duress not "the Postal Service or . . . any agent or employee acting within the scope of his agency or employment, but . . . another postal contractor . . . and . . . the unknown person who placed a note on the window of Mr. Carlile's truck." Appellant also refers to the vandalism to his truck as a source of concern to him and argues that all of these events caused him to be legitimately concerned for the safety of his driver.[2] Appellant argues that, to be legally significant, it is not necessary that the source of duress be the other party to the contract. Similarly, Appellant argues that the perceived threat need not be to the party asserting duress but, instead, may be directed at another person, for whom the party felt responsible. Appellant argues the "threats by [a third party] to another for whom he had a legitimate concern constituted duress" as a result of which he may repudiate his agreement to waive payment of the indemnity.
Respondent argues that none of the required elements of duress is present here. Respondent further argues that while Appellant may have faced a difficult business decision, the stress associated with such a decision does not support a finding of duress.
It is uncontroverted that Appellant agreed to waive the payment of an indemnity in connection with the termination of his contract. He now contends that he may repudiate that agreement and require Respondent to pay the indemnity that would otherwise have been payable in connection with a termination for convenience. As the party asserting the claim, Appellant bears the burden of proving that he is entitled to recover the indemnity associated with a convenience termination, notwithstanding his agreement to waive the payment of that indemnity. Centennial Leasing Corp., PSBCA No. 3271, 93-3 BCA ¶ 26,108; Geneva C. Stone, PSBCA No. 3104, 93‑1 BCA ¶ 25,453; John A. and Pamela A. Darcy, PSBCA No. 2810, 91‑2 BCA ¶ 23,977; F & B Realty, PSBCA No. 2529, 91‑2 BCA ¶ 23,788. He has not done so.
In his first argument, Appellant contends that he was unaware of the erroneous calculation made by Respondent and, therefore, was unaware that he could have simply refused to implement the change to his contract. The contracting officer, believing erroneously that the change was less than $1,000, threatened to hold Appellant responsible if he failed to meet the new schedule. However, Appellant was free to make his own calculation of the impact of the change and to seek an increase in the proposed compensation for the change or to contest Respondent's determination that the change was an insignificant minor service change. Additionally, while Appellant may have been ignorant of the exact impact of the schedule change itself, he was aware of the substantial financial impact (well over $1,000) of installing the larger lift tailgate alone, which he understood to be a requirement of the change in service.[3] Therefore, Appellant knew or should have known that the change would have caused an increase of more than $1,000. Yet, he accepted, without objection, the contracting officer's offer to release him from contract performance in exchange for Appellant's waiver of the right to payment of the indemnity. This agreement settled the ongoing dispute between the parties regarding the change. Both parties gave up their rights under the original contract. Further, Appellant agreed to give up the indemnity and Respondent gave up any other options it might have had under the contract to get the service change implemented. This agreement constituted an accord and satisfaction with respect to the dispute between the parties, and Appellant is bound by his acceptance.
We do not accept Appellant's argument that he should be able to repudiate the waiver because it was signed under duress. Three elements are common to situations where duress has been found to exist. These are: (1) that one side involuntarily accepted the terms of the other; (2) that circumstances permitted no other alternative; and (3) that said circumstances were the result of coercive acts of the opposite party. Employers Insurance of Wausau v. United States, 764 F.2d 1572, 1576 (Fed. Cir. 1985); Fruhauf Southwest Garment Co. v. United States, 111 F. Supp. 945; 126 Ct. Cl. 51 (1953); Paul A. Mason, PSBCA No. 1449, 86-3 BCA ¶ 19,144. Proof of duress requires proof of wrongful conduct by Respondent. S.S. Silberblatt, Inc., P.O.D. BCA Nos. 243, 269, 74-2 BCA ¶ 10,770 at 51,213.
In this appeal, Appellant readily acknowledges that Respondent was not responsible for or the cause of the alleged duress. Further, there is no evidence that the contracting officer had even been advised by Appellant that he felt pressured or threatened because of his concern for his driver or that the contracting officer was otherwise aware of Appellant's concerns. Accordingly, Appellant has not proven at least one of the elements of duress (coercive acts by the other party) and may not, therefore, be relieved from the agreement that he made to waive the payment of any indemnity.[4]
The appeal is denied.
David I. Brochstein
Administrative Judge
Vice Chairman
I concur:
James A. Cohen
Administrative Judge
Chairman
I concur:
Norman D. Menegat
Administrative Judge
Board Member
[1] Appellant's report was that the other contractor had made an early pick up of mail intended for Appellant at one of Appellant's new stops, which was served by both contractors. Appellant complained that this practice resulted in the Postal Service employees at that stop leaving and locking the post office before Appellant’s driver arrived, thereby delaying Appellant's driver on one or two occasions while she tried to figure out how she could get access to the post office to make her scheduled pickup. (Tr. 14-15).
[2] Appellant also mentions as a source of concern a break-in that apparently occurred to a trailer that Appellant maintained at Douglas for the use of his driver. However, inasmuch as that break-in is alleged to have occurred on July 20, two days after Appellant signed the waiver of indemnity, we have discounted it as a possible source of duress. See Tr. 17-18.
[3] Appellant had not been informed that Respondent did not intend to require the larger-capacity lift.
[4] Appellant cites only one case, McCartney v. Wade, 2 Heiskell 369 (Tenn. 1870), for the proposition that duress may serve to vitiate a contract even if applied by someone other than, and independent of, the other contracting party. While that case arguably stands for the proposition urged by Appellant, the Board is persuaded by its own precedent and by precedent established in the Federal Circuit and Court of Claims (cited above), which cases require coercive acts on the part of the other contracting party as an element of duress.