Flexfab, LLC v. United States

62 Fed. Cl. 139, 2004 U.S. Claims LEXIS 249, 2004 WL 2181559
CourtUnited States Court of Federal Claims
DecidedSeptember 28, 2004
DocketNo. 02-1096C
StatusPublished
Cited by20 cases

This text of 62 Fed. Cl. 139 (Flexfab, LLC v. United States) is published on Counsel Stack Legal Research, covering United States Court of Federal Claims primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Flexfab, LLC v. United States, 62 Fed. Cl. 139, 2004 U.S. Claims LEXIS 249, 2004 WL 2181559 (uscfc 2004).

Opinion

OPINION AND ORDER

BLOCK, Judge.

Flexfab LLC (“Flexfab”) initiated this action for damages, demanding payment for goods delivered to the government. A manufacturer of specialized hose, ducts, connectors, and related products, Flexfab claims that it is a third party beneficiary to a contract between The Defense Logistics Agency, Defense Supply Center Columbus (“DSCC”), and an insolvent contractor, Capital City Pipes, Inc. (“Capital City”). Alternatively, Flexfab claims that it had an implied-in-fact contract with DSCC. The parties have filed cross motions for summary judgment pursuant to Rule 56 of the Rules of the United States Court of Federal Claims (“RCFC”).

[141]*141Underlying this case is a tangled factual pattern worthy of a law school exam. The original contract required DSCC to remit payment to Capital City at its address in Tallahassee, Florida. However, a letter incorporated into the contract prior to its execution directed DSCC to remit payment to Capital City at an address in Grand Rapids, Michigan. A later modification to the contract directed DSCC to remit payment to the same Michigan address. Nevertheless, the modification did not indicate that the address was associated with Capital City, Flexfab, or any other entity. Adding to the confusion, the contract also permitted DSCC to pay Capital City by electronic funds transfer into the account that Capital City had listed in a central registry.

To a degree, the contract went as planned. The DSCC received the hose that it needed, and it paid Capital City, by electronic transfer, at the agreed-upon price. However, Capital City, the prime contractor, failed to pay Flexfab, a subcontractor on the contract. In apparent anticipation of this turn of events, Flexfab had attempted to ensure that it would be paid directly by the government. The Michigan address listed in both the aforementioned letter incorporated into the contract and the modification was associated with Flexfab’s escrow account. According to Flexfab, DSCC or other Defense Department employees knew that the Michigan address was associated with Flexfab’s escrow account — and that Flexfab would perform as a subcontractor on the condition that the government would send payments directly to its escrow account. Flexfab bases its third-party beneficiary and implied contract claims primarily on these facts.

It is black letter law that because it is sovereign, the United States may not be sued unless it so permits. United States v. Lee, 106 U.S. 196, 207, 1 S.Ct. 240, 27 L.Ed. 171 (1882). And because of this sovereign immunity, the actions of its agents cannot bind the United States unless such agents acted with explicit lawful authority. Federal Crop Ins. Corp. v. Merrill, 332 U.S. 380, 384, 68 S.Ct. 1, 92 L.Ed. 10 (1947); Starflight Boats v. United States, 48 Fed.Cl. 592, 598 (2001). Therefore, as will be explained in greater detail below, to survive summary judgment on its third-party beneficiary claim, Flexfab must produce some evidence that a DSCC agent with contracting authority intended the contract with Capital City to benefit Flexfab. Likewise, to survive summary judgment on its implied-in-fact contract claim, Flexfab must produce evidence of the same contracting authority.

Oliver Wendell Holmes observed that: “Men must turn square corners when they deal with the government.” Rock Island, Arkansas & Louisiana R.R. Co. v. United States, 254 U.S. 141, 143, 41 S.Ct. 55, 65 L.Ed. 188 (1920). Justice Felix Frankfurter explained that this observation does “not reflect a callous outlook,” but acknowledges the duty of courts to carefully observe the law when “charging the public treasury.” Merrill, 332 U.S. at 385, 68 S.Ct. 1. This court is not unsympathetic to the hardship suffered by the plaintiff. However, because Flexfab has failed to produce evidence that a DSCC agent with contracting authority either intended the contract with Capital City to benefit Flexfab, or intended to contract directly with Flexfab, this court is compelled to rule in favor of the government.

Consequently, the court denies the plaintiffs motion and grants the defendant’s cross-motion for summary judgment.

I. Factual Background1

What might have been a routine government contract with a small cast of parties and payment options became something of a complex affair due to a set-aside program for disadvantaged and minority contractors. As the following summary of facts demonstrates, individuals and companies became involved and contractual terms regarding payment multiplied to cope with a situation in which Flexfab performed as a subcontractor (permitting Capital City to benefit from the set-aside program as prime contractor) even though it wanted to be treated as much more.

[142]*142The DSCC awarded Contract No. SP0740-99-C-1004 (“Contract”) to Capital City on June 29,1999. Capital City obtained the Contract under the Small Business Administration (“SBA”) program for disadvantaged and minority contractors (“8(a) program”). See 15 U.S.C. § 637(a) (2000). The Small Business Act requires all federal agencies to identify procurement contracts to be completed by disadvantaged and minority businesses. See id. The DSCC employed five small business specialists to review each DSCC contract solicitation above $10,000 to determine whether it could be completed by an SBA-approved 8(a) contractor. Pl.’s App. at 97. Once a solicitation is placed in the DSCC’s small business program, it must be filled by an 8(a) contractor unless none can be found. Id. at 101. Each DSCC small business specialist handled all solicitations from a defined product group. Id. at 97. Michael Taylor was the DSCC small business specialist who handled solicitations of air-duct hose, among other things. Id. at 101.

Taylor arranged for Capital City’s participation in the 8(a) program through C & S Industrial Supply Company (“C & S”), which was DSCC’s established 8(a) air-duct hose supplier until 1998, when C & S’s eligibility to participate in the program expired. Id. at 101. After C & S “graduated” from the program, Taylor asked Henry Cook, Chief Executive Officer of C & S, to help him identify a new 8(a) contractor to serve as DSCC’s air-duct hose supplier. Id. at 22. Cook gave Taylor the name of Capital City as well as several other potential suppliers. Id. Eventually, the SBA qualified Capital City as an 8(a) contractor at the request of Taylor, and Taylor updated DSCC’s records to indicate that Capital City was DSCC’s new air-duct hose supplier. Id. at 102.

When the DSCC next needed to procure air-duct hose, in the first months of 1999, Anita Luich, the DSCC contracting officer that handled the Contract in the pre-award period, contacted Capital City. Id. at 38-40. Capital City approached Flexfab to manufacture the air-duet hose, but Flexfab refused to sell directly to Capital City. Pl.’s PFUF at HIT 16-18. Instead, Flexfab insisted that Capital City purchase Flexfab products through C & S. Id. at ¶ 18.

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Cite This Page — Counsel Stack

Bluebook (online)
62 Fed. Cl. 139, 2004 U.S. Claims LEXIS 249, 2004 WL 2181559, Counsel Stack Legal Research, https://law.counselstack.com/opinion/flexfab-llc-v-united-states-uscfc-2004.