Appeals of
ADIRONDACK FREIGHT, INC.
Under Contract Nos. HCR
12036, HCR 12071, and HCR 12874
PSBCA Nos. 4941 and 5166
APPEARANCE FOR APPELLANT:
Pamela M. DeLap
APPEARANCE FOR RESPONDENT:
Ruth L. Gottlieb, Esq.
OPINION
OF THE BOARD
Appellant, Adirondack Freight, Inc., held three contracts for mail transportation and rural box delivery with Respondent, United States Postal Service. With Respondent’s consent, Appellant transferred all three contracts to third parties. Thereafter, Appellant submitted a claim to Respondent related to the transfer of one of the contracts and a number of claims that arose out of Appellant’s performance of all three contracts before they were transferred. The contracting officer denied the claims, and Appellant appealed.
At
the parties’ election, the appeals are being decided on the record without an
oral hearing. The parties submitted
additional evidence, including declarations of witnesses, and briefs in support
of their positions. Entitlement only is
at issue (Orders dated March 2 and
FINDINGS
OF FACT
1. On
2. On
3. On
4. Appellant intended to perform the contracts
by hiring drivers. Appellant’s president
did not intend to drive any of the routes herself and was not a regular driver
under any of the contracts. (AF4941 1,
AF 5166 1, 3 (Pre-Award Questionnaire, item 12, in each contract); App. Exh. 204, 285-286, 309).
5. Appellant used vehicles complying with the
requirements of each of the contracts. For
contract HCR 12071 (
6. Each of the contracts authorized the contracting officer to release the contractor for medical reasons under certain conditions:
“The contracting officer may release an individual sole-proprietor supplier from the contract for reasons of physical disability which prohibit the supplier from adequately operating the route, or which endanger the supplier’s life if operation of the route continues, if:
(1) The supplier applies to the contracting officer for a release;
(2) The contracting officer determines that a release will be in the interest of the Postal Service; and
(3) The Postal Service secures a new contract.”
(AF4941 1, AF5166 1, 3 (Clause H.14, RELEASE OF SUPPLIER (Clause B-70) (January 1997) of each contract)).
7. In December 2001, Appellant requested to be released from its contracts due to the ill health of its president, providing notes from her doctors in support of the request (AF5166 5 (pp. 17, 18, 46); App. Exh. 102, 327, 328, 370).
8. The contracting officer denied the request, concluding that the contract release provisions (Finding 6) applied only to contractors who were individual, sole proprietors and that relief under the provision was not available to Appellant, a corporation (AF4941 1 (p. 3); AF5166 5 (pp. 8, 42-43); App. Exh. 64, 98-99, 102; Declaration of Joseph G. Arsenault).
9. The contracts prohibited their transfer to
others without the permission of the contracting officer, and each contract authorized
the contracting officer to terminate it for default if Appellant transferred
the contract without such approval (AF4941 1 (Contract Clause H.5, EVENTS OF
DEFAULT (Clause B-69) (January 1997), subsection d, and Contract Clause H.1, ASSIGNMENT
OF CLAIMS (Clause B-8) (January 1997) (Also see same clauses in AF5166 1, 3))).
10. After the contracting officer refused to release Appellant from the contracts for medical reasons, Appellant sought Respondent’s permission to transfer the contracts. Respondent consented, provided that Appellant and the transferee of each contract executed a novation agreement in a format required by Respondent. (AF5166 4 (pp. 42-43, 68-69); App. Exh. 344).
11. For contract HCR 12874 (
12. Effective
13. Thereafter, Appellant, Bradwell and Respondent entered into a Novation Agreement, written by Appellant’s attorney according to Respondent’s format, in which Respondent consented to the transfer of the contract to Bradwell and agreed to recognize Bradwell as Appellant’s successor in performance of the route. (AF4941 2, 3 (Novation Agreement section (c) (4))). The Novation Agreement also recited that the Ford F350 van had been transferred to Bradwell (AF4941 3 (Novation Agreement section (b) (2))).
14. The Novation Agreement provided,
“ (1) The Transferor [Appellant] confirms the transfer to the Transferee [Bradwell], and waives any claims and rights it now has or may have in the future against the U.S. Postal Service in connection with the Contract.
* * *
(7) The Transferor and Transferee agree that the U.S. Postal Service is not obligated to pay or reimburse either of them for, or otherwise give effect to, any costs, taxes, or other expenses, or any related increases, directly or indirectly arising out of or resulting from the transfer or this Agreement other than those that the U.S. Postal Service in the absence of this transfer or the Agreement would have been obligated to pay or reimburse under the terms of the Contract.”
(AF4941 3 (Novation Agreement sections (c) (1) and (c) (7))).
15. Notwithstanding the recitation in the Novation Agreement and the Transfer Agreement that the vehicle Appellant used to perform the contract had been transferred to Bradwell (Findings 12, 13), Bradwell did not use that vehicle in performing the route (App. Exh. 344; Response of Pamela M. DeLap to Declaration of Helen L. Hynes, ¶6). Respondent approved Bradwell’s use of a different vehicle on the route (AF4941 4).
16. By letter dated
17. In a final decision dated July 10, 2002, the contracting officer advised that the Novation Agreement was binding, that Appellant’s dispute appeared to be with Bradwell not Respondent, and that in the Novation Agreement Appellant waived all claims and rights against Respondent. He denied Appellant any relief and advised it of its appeal rights. (AF4941 6).
18. Appellant’s
19. Effective
20. The Novation Agreement for contracts HCR 12036 and HCR 12071 included waiver and release language identical to that included in the Novation Agreement for HCR 12874, as quoted in Finding 14, above (AF5166 5 (pp. 2-3, Novation Agreement sections (c) (1) and (c) (7))).
21. In late November or early December 2003,
Appellant submitted a certified claim to the contracting officer that related
to contract No. HCR 12874 (
22. By final decision dated
DECISION
Unless there is
some ground for concluding that the Novation Agreements are not binding on
Appellant, by its agreement to their terms Appellant waived its right to pursue
any existing and future claims against Respondent in connection with the
contracts (Findings 14, 20).
Appellant argues that it was forced to accept the Novation Agreements on Respondent’s terms. However, there is no provision in Appellant's contracts granting it a right to transfer the contracts to another party. The transfer of Appellant's contracts was generally prohibited (Finding 9), and whether to permit such a transfer is left to the discretion of the contracting officer. See Hubbard Trucking, Inc., PSBCA No. 3701, 04-2 BCA ¶ 32,667, recon. denied, 97-1 BCA ¶ 28,813. As Respondent was not required to consent to transfer of the contracts, Respondent’s insistence on a particular format for the Novation Agreements, one that included Appellant’s waiver of its right to prosecute contract-related claims, was within its discretion. Under the circumstances present in these appeals, Respondent’s insistence upon use of a Novation Agreement format that included such a waiver of Appellant’s right to prosecute claims was not an abuse of discretion. See Gary W. Noble, PSBCA No. 4094, 99-2 BCA ¶ 30,413, recon. denied, 00-1 BCA ¶ 30,602.
Appellant argues
that it should not have been required to enter into Novation Agreements in the
first place because the contracting officer’s refusal to grant it a medical
release from the contracts was improper.
However, the medical release provision of Appellant’s contracts applied
only to “individual sole-proprietor supplier[s].” (Finding 6). Appellant, as a corporation, did not qualify under
the language of the provision.
Appellant argues that it was a corporation consisting only of Appellant’s president and her husband and that the corporation could have been dissolved on short notice if necessary to qualify for a release. However, that step was not taken, so we need not consider what impact, if any, that action might have had. Under the circumstances presented, it was not an abuse of discretion for the contracting officer to deny Appellant releases from its contracts based on its president’s medical condition. See Linda Copman, PSBCA Nos. 4889, 4903, 03-2 BCA ¶ 32,342.
Furthermore, the illness of key personnel of a corporation generally does not excuse the company’s nonperformance of its contract, especially where, as here, the particular employee does not personally perform the contract (Finding 4). See M. W. Microwave Corp., ASBCA No. 45084, 93-3 BCA ¶ 26,027.
Appellant also argues that the medical condition of Appellant’s president prevented it from making reasonable decisions regarding the novations. Appellant had legal advice from its attorney regarding the novations (Findings 12, 13, 19, 21), and it has not shown that Appellant lacked the capacity to enter into the agreements or that it should be relieved of its agreement to the novations because of its president’s medical condition.
In PSBCA No. 4941 (Contract HCR 49412874), Appellant complains that it suffered damages because, contrary to the representation in the Transfer Agreement and Novation Agreement (Findings 12, 13), Bradwell did not buy Appellant’s Ford F350 van. According to Appellant, Respondent is liable for its damages because Respondent permitted Bradwell to perform the delivery services using a different vehicle (Finding 15). Respondent correctly points out that a promise by Bradwell to purchase the vehicle does not arise under any contract between Appellant and Respondent. There is nothing in the Novation Agreement requiring Respondent to assure that Bradwell purchase Appellant’s vehicle, and Appellant has failed to show any duty on Respondent’s part to assure that Bradwell kept the bargain it apparently made with Appellant. Thus, Appellant has not shown that Respondent breached the Glens Falls Novation Agreement by permitting Bradwell to perform with a vehicle other than Appellant’s, and the claim in PSBCA No. 4941 is without merit.
As to its legal expenses claim, Appellant has not identified any particular legal expenses or pointed to any basis on which payment of legal fees could be justified at this stage. The only legal services on Appellant’s behalf evident in the record were for the purpose of preparing the Transfer and Novation Agreements for the three contracts and other documents related to the transfer of the contracts. For those, however, the language of the Novation Agreements is dispositive. Appellant specifically agreed that Respondent would not be obligated to pay or reimburse any expenses arising out of the transfer of the contracts unless Respondent would have been otherwise obligated to pay those expenses under the terms of the contracts (Findings 14, 20). There is nothing in the three contracts that would require Respondent to pay Appellant’s legal fees under these circumstances.
The language in the Novation Agreements is
unambiguous. Appellant gave up the right
to prosecute any claims it possessed at the time of the novations,
including those claims at issue in these appeals, and Appellant may not
prosecute them now. See Kenneth and Vernell
Chadwell, PSBCA No. 3587, 95-1 BCA ¶ 27,319; Systems & Electronics, Inc.,
ASBCA Nos. 41113, 48097, 97-1 BCA ¶ 28,671 at 143,203.
Accordingly, the appeals are denied.
Norman D. Menegat
Administrative Judge
Board Member
I concur:
David I. Brochstein
Administrative Judge
Acting Chairman
[1] On