July 12, 2006
Appeal of
SAMSON J. HYPOLITE
Under Contract No. HCR 302M3
PSBCA No. 5266
APPEARANCE FOR APPELLANT:
Samson J. Hypolite
APPEARANCE FOR RESPONDENT:
Douglas J. Colton, Esq.
Office of the General Counsel
OPINION OF THE BOARD
Appellant,
Samson J. Hypolite, appealed the termination of his
mail transportation contract by Respondent, United States Postal Service. At
the election of the parties, this appeal is being decided on the record without
an oral hearing in accordance with 39 C.F.R. §955.12. Only entitlement will be addressed.
FINDINGS OF FACT
1. In February 2004, Appellant submitted the low
offer in response to Respondent’s solicitation for mail transportation service between
the Atlanta Processing and
2. On April 5, 2004, Respondent awarded Appellant contract HCR 302M3 for the Atlanta-Meansville service for the term May 1, 2004, through June 30, 2007, at the rate of $51,447.39 annually. The Administrative Official, responsible for the day-to-day administration of the contract, was located at the Atlanta P&DC. (AF 1 (pp. 1, 67, 68, 73); Stip. 2).
3. The contract required that Appellant “carry all mail tendered for transportation under this contract . . . in accordance with the operating schedule and between the points fixed in the schedule” (AF 1, Contract Clause B.3.a (p. 75)).
4. In the event of a dispute arising during performance of the contract, the contract required Appellant to proceed diligently with performance of the contract and comply with any decision of the contracting officer (AF 1, Contract Clause H.2, CLAIMS AND DISPUTES (Clause B-9) (January 1997) (p. 114)).
5. The contract’s Termination for Default provision authorized Respondent to terminate the contract for default if Appellant failed to “[c]omplete the requirements of this contract within the time specified in the contract.” (AF 1, Contract Clause H.4, TERMINATION FOR DEFAULT (Clause B-13) (January 1997) (Modified), subsection a.(1)(a) (p. 115)).
6. The Termination for Default clause provided
that if after Respondent terminated the contract for default it was determined
that Appellant was not in default or that any delay was excusable, “the rights
and obligations of the parties will be the same as if the termination had been
issued for convenience.” (
7. The contract’s Termination for Convenience clause provided that in the event Respondent terminated the contract for convenience, Appellant, as his full remedy, would be entitled to be paid as liquidated damages the sum set forth in the contract’s Changes clause. The Changes clause authorized liquidated damages of 1/3 of the contract’s annual rate if the convenience termination occurred in the first two years of contract performance. (AF 1, Contract Clauses H.3, TERMINATION FOR CONVENIENCE (TRANSPORTATION) (Clause B-71) (January 1997) and H.8, CHANGES (TRANSPORTATION) (Clause B-67) (January 1997), subsection e.(2) (pp. 115, 118-119)).
8. The contract required that Appellant “deny access to the mail to any employees or personnel when required to do so by the contracting officer.” (AF 1, Contract Section B.3, GENERAL REQUIREMENTS AND PROHIBITIONS, subsection h (p. 77); Stip. 5).
9. For security purposes, the contract required that all drivers on the route obtain a non-sensitive security clearance through the Postal Inspection Service (AF 1, Contract Section B.5, SCREENING/IDENTIFICATION REQUIREMENTS (p. 78-79)). Appellant applied for the necessary clearance by submitting to the Administrative Official a completed Contract Personnel Questionnaire, fingerprints, photograph and driving record (AF 1, (pp. 32-33) and Contract Clause B.5 (pp. 78-79)).
10. The Contract Personnel Questionnaire included questions related to the applicant’s criminal background:
“21a. Have you ever been convicted of, or forfeited collateral for any felony/misdemeanor violation (Except traffic violations)?
21b. During the last 10 years have you forfeited collateral, been convicted, been imprisoned, been on probation, or been on parole for any violation of law?
21c. Have you ever been convicted of, or forfeited collateral for any assaults, firearms or explosives violations?
21d. Are you now under charges for any violation of law?”
Appellant marked the “No” box for each of the above questions. (AF 1 (p. 33)).
11. On
12. As authorized by the contract, Respondent
issued Appellant a temporary identification badge that permitted him to perform
the contract service pending completion of the screening. He began driving the route on
13. By letter dated
14. The Inspection Service letter further stated,
“Please provide the applicant with a copy of this letter.
The applicant has the right to appeal this decision within three (3) weeks from the date of this letter. If an appeal is made, it must be submitted in writing and should include a detailed response to affirm or deny each of the allegations listed above. Also, attach a certified copy of any pertinent court documents and forward the appeal to:
Inspector in Charge, Group 1 – Security
475 L’Enfant Plaza, SW
Washington, DC 20260-2186”
(AF 3 (p. 158)).
15. The appeal procedure set out in the Inspection Service letter reflects Respondent’s established procedure as set forth in Management Instruction PO-530-2004-2, Screening Highway Transportation Contract Employees. That Management Instruction requires the administrative official to provide Appellant a copy of the Inspection Service denial letter by certified mail, and establishes the appeal process available to Appellant. (Attachment to Respondent’s Declaration of Bobby L. Mays (Management Instruction PO-530-2004-2, Screening Highway Transportation Contract Employees, Sections 162, 171, 171.1)).
16. The P&DC sent the Inspection Service letter
to the contracting officer on
17. There is no evidence that either the P&DC or the contracting officer gave Appellant a copy of the Inspection Service letter. However, by letter of July 7, the contracting officer advised Appellant that he had decided to deny Appellant driving privileges and access to the mail temporarily because of the conviction, effective immediately.[1] He noted that Appellant still had to run the route. The contracting officer’s letter advised,
“If you have any information that
you believe to be material to this case and would like for me to consider when
making my final decision, please submit such information to this office not
later than
(AF 3 (pp. 163-164); Stip. 7).
18. On
19. The contracting officer wrote to Appellant on
“While the information it contains seems to be what is required to clear up your conviction for the Possession of Drugs charges, it was sent to the wrong office. Your back ground [sic] investigation was completed by the Postal Inspection Service department.
Your letter should be sent to the U
S Postal Inspection Service, Memphis ISOSG 225 North Humphreys Blvd., 4th Floor
South,
(AF 3 (p. 167); Stip.
9). This was the address for initial
submission of clearance requests, not the address for appeals referred to in
the
20. Service on the route deteriorated in late
2004 as Appellant had difficulty hiring, retaining and training reliable
drivers. Between November 2 and
21. After two more instances of late service, the
Transportation Manager issued Appellant a Final Request for Service Improvement
on
22. On February 4, 2005, Appellant faxed to the
contracting officer a notarized, “to whom it may concern” form signed by the
county prosecutor saying that the charges underlying the February 5, 2003
conviction had been dismissed as of January 19, 2005, and that Appellant “shall
not have been considered to have been, [sic] convicted of, nor found guilty or nolo contender to these charges.” The form included a telephone number for the
prosecutor in the event further information was required. (AF 7; Stip. 15). The contracting officer did nothing with this
information as he believed it should be considered by the Inspection Service
and that Appellant had again sent information to him in error (Declaration of
Bobby L. Mays, ¶ 8). The P&DC submitted a copy of this letter to the Inspection
Service on
23. On February 14, the P&DC forwarded its file reflecting Appellant’s unsatisfactory service to the contracting officer (AF 8). The file reflected two instances of late performance since January 22 plus omitted service for both trips on February 11 and 12, and one omitted trip on February 14 (AF 8 (pp. 201, 208-213); Stip. 16, 17).
24. On Saturday, February 26, Appellant’s driver
departed the P&DC for the morning trip but experienced a medical emergency,
parked the truck at a truck rental office, and went to the hospital. The truck was recovered and Appellant ran the
afternoon trip back to the P&DC himself.
However, on
25. On
26. On
27. On March 7, after receipt of Appellant’s fax,
the contracting officer terminated Appellant’s contract for default effective
close of business
28. Appellant filed a timely appeal of the termination (AF 17; Stip. 22).
DECISION
Respondent
argues that Appellant’s serious and continuing performance deficiencies
justified termination of his contract for default. Appellant argues that his deficiencies should
be excused because they resulted from Respondent’s refusal to permit him to
drive the route himself. While
performance deficiencies were shown, there
is no evidence they stemmed from anything but Appellant’s inability to drive
the route personally and his difficulty hiring, retaining and training drivers,
as he claims (Findings 13, 20, 21, 23, 24, 26).
Performance failures that ordinarily would be sufficient grounds
for a default termination will not warrant such termination if the deficient
service results from a material breach by Respondent of its obligations under
the contract. See Sharon Rhoades, PSBCA No. 3455, 94-2 BCA ¶ 26,950; Michael
N. Beckloff, PSBCA No. 2249, 89-2 BCA ¶ 21,767, recon.
denied, 89-3 BCA ¶ 22,118.
This contract included
an implicit covenant of good faith and fair dealing, see Rumsfeld v. Freedom NY, Inc., 329 F.3d 1320,
1330 (Fed. Cir. 2003); Restatement (Second) Contracts, § 205, under which Respondent
had an implied duty to cooperate and not to negligently or willfully interfere
with Appellant’s performance. See
Peter Kiewit Sons’
While not every breach of Respondent’s duty
to cooperate is material, see Sharon Rhoades, PSBCA No. 3455,
94-2 BCA ¶ 26,950, the breach in this case was.
The Court in Malone v.
“According to Restatement (Second) of Contracts §241(e) (1981), ‘the
extent to which the behavior of [a] party failing to perform . . . comports
with standards of good faith and fair dealing’ is a significant factor in
determining whether that party’s breach is material. The Restatement also states that ‘subterfuges
and evasions violate the obligation of good faith,’ as does lack of diligence
and interference with or failure to cooperate in the other party’s
performance.
Malone v.
Although Appellant had
information relevant to the charge of marijuana possession that might have
affected the clearance decision had it reached the appropriate appellate office
of the Inspection Service, he was never given the information necessary for a
meaningful appeal of his denial of clearance.
Neither the Atlanta P&DC nor the contracting officer gave Appellant
the Inspection Service letter, which included a statement of Appellant’s appeal
rights, as directed by Postal Service rules and the letter itself (Findings 16,
17). The contracting officer invited
Appellant to submit information bearing on the denial of access to him (Finding
17), but when Appellant did so, following exactly the contracting officer’s
instructions, the contracting officer told him that he had sent the information
to the wrong place. Instead of forwarding
Appellant’s submission to the appropriate Inspection Service office or providing
Appellant the correct address for appeals of security clearance denials
(Finding 14), the contracting officer misdirected Appellant to a different
Inspection Service office—one that handled initial screenings rather than appeals
of clearance denials (Findings 11, 19).
Respondent took no action to consider the information Appellant provided
in July 2004, even though the contracting officer’s initial review persuaded
him that the information—that the conviction had been vacated—likely was what
was needed to warrant reconsideration of the denial of access.
On
Respondent was aware that Appellant intended
to perform the contract personally, and performance was satisfactory for the
first two months of the contract when Appellant had driven the route (Finding 12). Respondent was also aware of the hardship and
expense caused Appellant by his denial of access (Findings 16, 20, 24, 26), yet
its officials did not consider Appellant’s evidence regarding dismissal of the
marijuana possession charge. The
contracting officer offered Appellant an opportunity to respond to the denial
of access (Finding 17) and later to respond to the unsatisfactory performance
(Finding 25) but failed to give any meaningful consideration to Appellant’s
submissions (Findings 19, 26).
Respondent suggests that it was entirely
Appellant’s responsibility to clear up the 2003 marijuana possession conviction
and reestablish his clearance to run the route.
However, Appellant took reasonable steps to obtain clearance to drive,
and it was the contracting officer’s misdirection and unwillingness to consider
the information Appellant submitted that thwarted Appellant’s efforts to obtain
reconsideration of the denial of clearance.
Respondent’s conduct in this case falls well below the standard of good
faith and fair dealing and severely impacted Appellant’s ability to perform the
contract. Under these circumstances, Respondent’s
interference with Appellant’s performance materially breached its duty to
cooperate and provides Appellant with a legal right to avoid the contract,
discharges his duty to perform, and relieves Appellant of the default
termination. See Malone v.
Respondent points for support to Benjamin
Mullins, PSBCA Nos. 5136, 5173, 05-1 BCA ¶ 32,918, in which the Board
concluded that denial of the contractor’s access to the mail did not relieve
him of the obligation to perform the contract and that his refusal to perform justified
termination of the contract for default.
However, in that case, the contractor’s denial of access had continued
for only nine days; the contractor’s experienced substitute drivers were
satisfactorily performing the contract; the contractor was properly advised of
his right to appeal the denial of access; and he was in the appeal process when
he refused to perform further. Here,
despite his best efforts over about 8 months, it was very difficult, if not impossible,
for Appellant to continue performing under Respondent’s denial of access, and Appellant
was never provided an opportunity for a meaningful appeal of his denial of a security
clearance.
Respondent argues as an independent justification for the default termination what it considers to be Appellant’s failure to report the then-pending marijuana possession charge on his Contract Personnel Questionnaire submitted at the time of contract award (Findings 9, 10). In his declaration submitted in the appeal, the contracting officer states that although he did not rely on Appellant’s lack of candor when terminating the contract, now, upon reflection, he would have been uncomfortable with such a contractor and on that basis might have terminated the contract or decided not to restore access to Appellant even if the marijuana charges were dismissed. This argument was not mentioned in the Answer and was raised for the first time in Respondent’s brief. It is a speculative argument, not supported by facts in the record regarding, for example, whether the marijuana charge should have been reported and what Respondent—the Inspection Service—would have done if it had been. The evidence on this issue, undeveloped in the record, is not sufficient to warrant a termination for default in the face of Respondent’s material breach described above.
The appeal is sustained. The termination for default is converted to a termination for Respondent’s convenience, and the matter is remanded to the parties for negotiation of quantum in accordance with the contract’s Termination for Convenience and Changes clauses (Findings 6, 7).
Norman D. Menegat
Administrative Judge
Board Member
I concur:
William A. Campbell
Administrative Judge
Chairman
I concur:
David I. Brochstein
Administrative Judge
Vice Chairman
[1] The contracting officer intended that the denial of
access prevent Appellant not only from operating the route personally, but also
from coming to postal facilities to train or instruct his drivers, and he
subsequently specifically instructed the P&DC that Appellant was not to be
allowed on the premises to train his drivers (AF 10).