July 14, 2005

Appeal of

FANFARE CARDS AND GIFTS

Under Contract No. 118925-89-P-0484

PSBCA No. 5235

APPEARANCE FOR APPELLANT:

Wayne G. Mandat

APPEARANCE FOR RESPONDENT:

Gary Shapiro, Esq.

OPINION OF THE BOARD

            Appellant, Fanfare Cards and Gifts, appeals from a contracting officer’s decision denying its claim based on the termination by Respondent, United States Postal Service, of Appellant’s contract to operate a contract postal unit in Palm Harbor, Florida.  This appeal is being decided on the written record under the Board’s Accelerated procedure.  39 C.F.R. §§ 955.12 and 955.13.

FINDINGS OF FACT

            1.  In 1985, Respondent entered into a contract with a predecessor of Appellant for the operation of a contract postal unit (CPU) in Palm Harbor, Florida.  The contract was to continue “indefinitely” unless terminated pursuant to the “Termination of Contract” provision.  Under that provision, the contractor “or USPS may end (terminate) this contract on 60-days’ written notice.  The contracting officer may end the contract if necessary to protect USPS’ interests after a 1-day written notice.”  (Appeal File, Tab (AF) 10, page 5235.0298).

            2.  Under the contract as originally awarded, the CPU was required to be open from 9:00 a.m. to 5:00 p.m. on Monday through Friday and from 9:00 a.m. to noon on Saturday.  In August 1992, by modification M08 to the contract, the hours of service were extended to 8:00 a.m. to 5:00 p.m. on Monday through Friday and to 9:00 a.m. to 2:00 p.m. on Saturday.  (AF 10, page 5235.0295; AF 9, page 5235.0211).

            3.  During the period of June through August 1999, Mr. Wayne G. Mandat, purchased Appellant and, by modification M014 to the CPU contract, assumed responsibility for complying with the terms of the contract.  (AF 9, pages 5235.0116-17, 5235.0131-39).

            4.  Prior to May 2003, Appellant operated the CPU on Saturdays, as required by the contract.  However, on Saturday, May 10, 2003, Appellant failed to open the CPU for business.  By letter dated, May 12, 2003, the contracting officer sent Appellant what she termed a “cure notice,” advising of three deficiencies in contract performance:  Failure to follow the Saturday hours of operation; failure to switch to a different type of postage meter, as Appellant previously had been directed to do; and directing rude comments to a customer in the facility.  Postal Service administrative personnel had previously received multiple complaints regarding rude behavior by Appellant’s owner and refusal to serve postal customers.  The May 12, 2003 letter warned that failure to comply with all contract requirements would result in a termination of the contract on one day’s notice.  (Supplemental Appeal File (SAF), pages 5235.0419-20, 5235.0431-32; AF 6; Declaration of Michele Schuemann, dated May 3, 2005 (Schuemann Decl.); Declaration of Donna St. Martin, dated May 10, 2005).

            5.  In a May 15, 2003 written response to the May 12, 2003 cure notice and in a conversation with a Postal Service retail specialist, Appellant’s owner questioned whether Saturday hours were required by his contract and indicated his displeasure over the fact that he had not been informed that a new CPU had been, or was about to be, opened within a mile of his location (Declaration of Mary Ann Knight, dated May 7, 2005 (Knight Decl.); AF 4, page 5235.0044-46).

            6.  Appellant’s CPU was again closed on Saturday May 17, 2003, and on the three days before Memorial Day - Thursday, May 22, 2003, through Saturday, May 24, 2003 – contrary to the requirements of the contract.  Appellant neither sought nor was granted permission by Respondent to close the CPU on those days.  (SAF, pages 5235.0431-32; Knight Decl.; Schuemann Decl.).

            7.  On May 27, 2003, Postal Service personnel and Postal Inspectors conducted an audit of the CPU, removed all stamps, money, and postal equipment, and effectively shut down operations at the CPU (AF 4, pages 5235.0040, 5235.0055, 5235.0056; AF 5).

            8.  Through contract modification M020, issued on June 16, 2003, the contracting officer stated that she was exercising the 60-day termination provision (Finding 1), and informed Appellant that the contract would terminate effective with the close of business on August 15, 2003 (AF 4).  In the modification, the contracting officer stated that while she believed there was a basis for terminating the contract on one day’s notice, she was specifically electing to exercise the 60-day termination provision.  Payments were made under the CPU contract through the end of the 60-day notice period, although the CPU did not operate after May 27, 2003 (Schuemann Decl.).

            9.  By letter dated September 12, 2003, Appellant’s owner filed a claim with the contracting officer in the amount of $68,798.77, which he alleged to be the value of the business’s assets as of July 1999, when he acquired it.  In the letter, the owner contended that with the closing of the CPU on May 27, 2003, and loss of the contract, he no longer had a business to run or sell.  (AF 2).

            10.  In a final decision dated October 10, 2003, the contracting officer denied the claim in its entirety.  By letter dated January 8, 2004, Appellant filed a timely appeal.  (AF 1; Attachments to Appellant’s Complaint (letter dated January 8, 2004, to the contracting officer, and Certified Mail Return Receipt indicating mailing on January 8 and receipt on January 12, 2004)).

DECISION

            Appellant’s owner argues that he owned the business for four years and operated the CPU in a satisfactory manner during the entire period.  He argues that paperwork was done on time, there were no thefts, and the volume of postal business increased each year.  He concedes that there were customer complaints, but argues that in working with the public, not everyone can be satisfied.  Finally, he argues that if someone from the Postal Service had taken the time to discuss concerns that existed with the CPU, they could have been resolved short of closing down the operation.  He also contends that if Respondent had issued the termination notice 60 days before closing the operation, rather than several weeks after it had actually been closed down, he could either have resolved the problems or sold the business to someone acceptable to the Postal Service, thus allowing service to continue without a break, and preventing him from losing his investment in the business.

            Respondent argues that a contracting officer is given great latitude in deciding whether to exercise the 60-day termination provision, and that a decision to exercise the 60-day provision must be upheld absent a showing of bad faith or an abuse of discretion.  Respondent contends that the facts in this appeal do not support a conclusion that the termination was taken in bad faith.  Further, Respondent argues that in assuming the contract, Appellant assumed the risk that Respondent might exercise the termination provision and, therefore, cannot have been damaged by the termination.

            When Respondent removed the stamps, money, and Postal Service equipment from the CPU on May 27, 2003, it breached the contract by effectively terminating the contract without giving either the one-day or sixty-day notice required by the Termination of Contract provision (Findings 1, 7).  On Time Postal Services, Inc., PSBCA No. 2528, 90-2 BCA ¶ 22,698.  This breach was not cured by the contracting officer’s later issuance of the contract modification citing the 60-day termination provision.  Id.

            Appellant’s claim is, in effect, a claim for damages caused by that breach.  Specifically, Appellant’s claim is that by shutting down the CPU at what would have been the beginning of the notice period, rather than at the end, Appellant’s owner lost the opportunity to attempt to sell his business with its major asset – the CPU contract – intact.  Therefore, Appellant’s owner contends, Respondent’s action caused him to lose the value of his investment in the business.

            In the case of a breach such as the one that occurred here, Appellant may recover those payments it would have received for the sixty-day period following issuance of the termination notice by the contracting officer.  On Time Postal Services, Inc., supra, at 113,996.  Appellant has already received those payments (Finding 8).

            With regard to the claim by Appellant’s owner for the value of his business, the record does not show that such damages were reasonably foreseeable at the time of contracting or that they were the natural and probable consequences of Respondent’s breach – i.e., the record does not show that the owner's loss of the value of his business was a reasonably foreseeable consequence of Respondent's failure to allow the CPU to operate during the period following the May 27, 2003 shut-down or the 60-day period following the issuance of the June 16, 2003 termination notice.  Accordingly, Appellant's owner may not recover the damages he seeks.  William C. Ramsey, et al. v. United States, 121 Ct. Cl. 426, 433 (1951); Consolidated Defense Corp., ASBCA No. 52315, 2003-1 BCA ¶ 32,099; Diamond Plaza, Inc., PSBCA No. 3846, 97-1 BCA ¶ 28,737.

            The appeal is denied.

David I. Brochstein

Administrative Judge

Vice Chairman

I concur:

James A. Cohen

Administrative Judge

Chairman