Nauset Construction Corporation v. Secretary of the Army

• Court: Court of Appeals for the Federal Circuit
• Decided: March 4, 2024
• Docket: 21-2305
• Status: Unpublished

Opinion

Case: 21-2305 Document: 54 Page: 1 Filed: 03/04/2024

NOTE: This disposition is nonprecedential.

United States Court of Appeals for the Federal Circuit ______________________

NAUSET CONSTRUCTION CORPORATION, Appellant

v.

SECRETARY OF THE ARMY, Appellee ______________________

2021-2305, 2022-1853 ______________________

Appeals from the Armed Services Board of Contract Appeals in Nos. 61673, 61675, Administrative Judge Lis B. Young, Administrative Judge Owen C. Wilson, Adminis- trative Judge Richard Shackleford. ______________________

Decided: March 4, 2024 ______________________

JOHN JOSEPH MCNAMARA, Lane McNamara LLP, Southborough, MA, argued for appellant. Also represented by ELISE M. KUEHN.

WILLIAM JAMES GRIMALDI, Commercial Litigation Branch, Civil Division, United States Department of Jus- tice, Washington, DC, argued for appellee. Also repre- sented by BRIAN M. BOYNTON, PATRICIA M. MCCARTHY, FRANKLIN E. WHITE, JR. Case: 21-2305 Document: 54 Page: 2 Filed: 03/04/2024

______________________

Before REYNA, TARANTO, and STOLL, Circuit Judges. STOLL, Circuit Judge. Nauset Construction Corp. appeals the final decision of the Armed Services Board of Contract Appeals, which dis- missed Nauset’s appeal of a default termination of a gov- ernment contract as untimely under the Contract Disputes Act. In particular, Nauset challenges the Board’s fact find- ings that (1) Nauset was not prejudiced by the appeal no- tice provided in the government’s termination letter; and (2) the government’s behavior following the termination letter did not vitiate the finality of the termination letter. Because the Board’s findings are supported by substantial evidence, we affirm the Board’s dismissal. BACKGROUND On November 1, 2013, the National Guard Bureau awarded a contract to Nauset to build the Guard’s Unit Training Equipment Site Project in Camp Edwards, Mas- sachusetts. On November 17, 2017, the contracting officer terminated Nauset’s contract for default. The termination letter stated: “[T]he Government is completely Terminat- ing Nauset for Default . . . . This notice constitutes such de- cision, and Nauset has the right to appeal under the Disputes clause of the contract.” J.A. 348. The termination letter, however, did not include the specific notice of appeal rights language required by Federal Acquisition Regula- tion (FAR) 33.211(a)(4)(v). Specifically, under that appli- cable FAR provision, the termination notice was required to contain language notifying the contractor that they “may appeal [the] decision to the agency board of contract ap- peals . . . within 90 days” of receipt of the decision or, alter- natively, “bring an action directly in the United States Court of Federal Claims.” FAR 33.211(a)(4)(v). Case: 21-2305 Document: 54 Page: 3 Filed: 03/04/2024

NAUSET CONSTRUCTION CORPORATION v. 3 SECRETARY OF THE ARMY

Within 90 days of receipt of the termination letter, Nauset submitted two letters to the contracting officer. First, on January 17, 2018, Nauset submitted a letter titled “Response to Termination of November 17, 2017 and Cer- tified Termination Claim and Request for Final Decision under the Contract Disputes Act.” J.A. 357. In this letter, Nauset disputed the termination and stated that it in- tended to submit a claim for costs. Nauset also stated that it “takes exception to the government’s decision to termi- nation for default . . . [and that it] will continue to vehe- mently invest every available resource to support [its] Claim, [its] position and reputation.” J.A. 370. The con- tracting officer acknowledged receipt of this letter by email stating “Email received.” J.A. 411. Then, on February 12, 2018, Nauset submitted a “Claim for Extended Time and Unpaid Completed Contract Work – Part 2 and Wrongful Termination.” J.A. 372. In the “Wrongful Termination” section of the letter, Nauset stated that it “intends to de- fend its position and prove that the government’s decision to terminate was based on . . . circumstances . . . beyond [its] control” and that it “submits this wrongful termination claim in accordance with the Contract Disputes Act.” J.A. 374–75. The contracting officer again acknowledged receipt via email stating “Received.” J.A. 413. On June 27, 2018, 222 days after the termination no- tice, Nauset appealed the decision to the Board. J.A. 129. The government filed a motion to dismiss, arguing that Nauset’s appeal of the termination for default was un- timely. Nauset replied that its appeal was not time-barred because, among other things, the government gave inade- quate notice of Nauset’s appeal rights and Nauset reason- ably and detrimentally relied on the lack of notice and was thus prejudiced by the lack of notice. In addition, Nauset asserted that the government’s conduct following the ter- mination vitiated the finality of the termination for default. The Board rejected each of these arguments and ultimately dismissed Nauset’s appeal as untimely. See Nauset Case: 21-2305 Document: 54 Page: 4 Filed: 03/04/2024

Construction Corp., ASBCA Nos. 61673, 61675, 21-1 BCA ¶ 37852, 2021 WL 2029232 (May 5, 2021) (Board Decision). Nauset appeals. We have jurisdiction under 28 U.S.C. § 1295(a)(10). DISCUSSION On appeal, Nauset argues that the Board erred in find- ing that the termination notice did not prejudice Nauset. Alternatively, Nauset asserts that the Board erred in find- ing that the government’s conduct did not vitiate the final- ity of the termination. We address each argument in turn below. Our review of the Board’s decision is limited by statute. Under the Contract Disputes Act, we review the Board’s legal determinations de novo and we may only set aside the Board’s findings of fact if they are “(A) fraudulent, arbi- trary, or capricious; (B) so grossly erroneous as to neces- sarily imply bad faith; or (C) not supported by substantial evidence.” 41 U.S.C. § 7107(b)(2). Whether the termina- tion letter prejudiced Nauset presents a question of fact that we review for substantial evidence. See Bannum, Inc. v. United States, 404 F.3d 1346, 1353 (Fed. Cir. 2005) (“Prejudice is a question of fact.”); see also Godley v. United States, 5 F.3d 1473, 1476 (Fed. Cir. 1993) (stating that whether the appellant suffered prejudice was a factual question). Similarly, whether the government’s actions vi- tiated the finality of the termination letter, or in other words, whether Nauset could reasonably believe that the contracting officer was reconsidering her decision, is a question of fact reviewed for substantial evidence. See Ra- Nav Lab’ys, Inc. v. Widnall, 137 F.3d 1344, 1346, 1348 (Fed. Cir. 1998) (determining that substantial evidence supports the ASBCA’s finding that the government’s con- duct following termination did not vitiate the termination of the contract); Am. Elec. Lab’ys, Inc. v. United States, 774 F.2d 1110, 1116 (Fed. Cir. 1985) (determining whether substantial evidence supports the ASBCA’s finding that a Case: 21-2305 Document: 54 Page: 5 Filed: 03/04/2024

NAUSET CONSTRUCTION CORPORATION v. 5 SECRETARY OF THE ARMY

party’s reliance on the government’s conduct was unrea- sonable). I Substantial evidence supports the Board’s finding that there was no prejudice or detrimental reliance here. While the termination notice was technically deficient under FAR 33.211(a)(4)(v), the notice stated that “Nauset has the right to appeal under the Disputes clause of the contract.” J.A. 348. It was reasonable for the Board to determine that this provided sufficient information to allow Nauset to look to the disputes clause of the contract, which would have ultimately led Nauset to 41 U.S.C. § 7104, stating Nauset’s appeal rights. In addition, while not necessary to our deci- sion, the record also shows that Nauset’s counsel reviewed the termination decision and conducted research on Nau- set’s appeal rights under FAR. Nauset argues that this finding is inconsistent with the Board’s finding that Nauset was confused and did not un- derstand that the termination notice starts the 90-day ap- peal clock. But, as Nauset’s counsel admitted at oral argument, any prejudice or detrimental reliance must be reasonable. See Oral Arg. at 3:06–3:45, https://oralargu- ments.cafc.uscourts.gov/default.aspx?fl=21-2305_1208202 3.mp3; see also J-Way Southern, Inc. v. U.S. Army Corps of Engs., 34 F.4th 40, 48 (1st Cir. 2022) (finding that the party’s asserted detrimental reliance on a termination no- tice was unreasonable) (citing J-Way Southern, Inc. v. United States, 516 F. Supp. 3d 84, 91 (D. Mass. 2021)). Here, while Nauset may have been confused, substantial evidence supports the Board’s finding that such confusion would have been unreasonable given the clear path from the termination notice to the FAR provision that provides Nauset’s appeal rights. Specifically, the termination notice pointed Nauset to the disputes clause of the contract, which incorporated FAR 52.233-1 (2002). FAR 52.233-1 explains that the contract is subject to the Contract Disputes Act, Case: 21-2305 Document: 54 Page: 6 Filed: 03/04/2024

formerly at 41 U.S.C. §§ 601–13. A quick search for the Contract Disputes Act would lead Nauset to the current version found at 41 U.S.C. §§ 7101–09, with § 7104 provid- ing information on appeal rights. Thus, while the notice of appeal was technically defective, Nauset’s appeal rights were reasonably discernible, and substantial evidence sup- ports the Board’s weighing of the evidence and finding that it is hard to imagine that Nauset would not know of its ap- peal rights by exercising a little diligence. See, e.g., J-Way Southern, 34 F.4th at 49 (“[F]rom the adequate-notice standpoint, [the termination notice] provided the relevant regulatory and statutory breadcrumbs a reader could (and should) follow to find the appellate logistics.”). II For the reasons below, we also hold that substantial evidence supports the Board’s finding that the govern- ment’s conduct did not vitiate the finality of the termina- tion decision. Nauset argued that it reasonably believed that the contracting officer was reconsidering the termina- tion decision based on the contracting officer’s emails ac- knowledging receipt of Nauset’s January 17, 2018 and February 12, 2018 letters, as well as a letter from the con- tracting officer on March 26, 2018, stating that she was still reviewing Nauset’s February 12 claim. Nauset also pointed to communication between its attorney and gov- ernment counsel on November 28, 2017 and communica- tions with the government starting in April 2018 as support for its belief. The Board did not consider the com- munications after February 15, 2018—the end of the 90- day appeal window—stating that “[i]t is well settled that the government’s actions must have occurred within the 90-day jurisdictional window in order to vitiate the finality of the termination.” Board Decision, 2021 WL 2029232. The Board ultimately found that Nauset did not provide sufficient evidence to demonstrate that it reasonably could have concluded that the contracting officer was reconsider- ing the termination decision. Case: 21-2305 Document: 54 Page: 7 Filed: 03/04/2024

NAUSET CONSTRUCTION CORPORATION v. 7 SECRETARY OF THE ARMY

At the outset, we hold that the Board erred in holding as a matter of law that evidence of events that occurred after the 90-day appeal window are per se irrelevant to this factual inquiry. While we recognize that such evidence most often will have no bearing on an appellant’s under- standing of the finality of the contracting officer’s decision during the appeal window, it cannot be said that such evi- dence will never have any bearing on the issue. The Board’s per se rule is therefore incorrect, and further, not supported by our precedent. The Supreme Court has cau- tioned against such rigid per se rules in other instances. See Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545, 553 (2014) (rejecting a per se framework as “unduly rigid”); KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398, 415, 419–20 (2007) (rejecting a “rigid approach” and cau- tioning against “transform[ing] [a] general principle into a rigid rule”); Festo Corp. v. Shoketsu Kinzoku Kogyo Ka- bushiki Co., 535 U.S. 722, 738 (2002) (stating that doctrine is to be applied in a “flexible way, not a rigid one”). The Board’s error here, however, was harmless. Our review of the evidence, including the post-90-day appeal window ev- idence, confirms the Board’s view that in this case, Nauset could not have reasonably concluded that the contracting officer’s termination decision was being reconsidered prior to the appeal deadline. In other words, the Board’s finding that the contracting officer’s conduct did not vitiate the finality of the termina- tion decision is supported by substantial evidence. When Nauset asked the contracting officer to reconsider the ter- mination decision, the contracting officer’s emails stated “Email received” and “Received” with nothing further. J.A. 411, 413. Because the contracting officer merely acknowledged receipt, it was reasonable for the Board to conclude that Nauset could not have reasonably believed that the contracting officer was reconsidering her decision based on Nauset’s request for reconsideration or the of- ficer’s emails. Further, while the government counsel told Case: 21-2305 Document: 54 Page: 8 Filed: 03/04/2024

Nauset’s attorney eleven days after the termination notice that it was possible that the termination for default could be converted to a termination for convenience, the record— including an affidavit by Nauset’s attorney—does not indi- cate that the counsel had any further communication or that the contracting officer was involved in any such con- versation. As such, the evidence supports the Board’s find- ing that the statement by government counsel was not sufficient to indicate that the contracting officer was recon- sidering the decision. CONCLUSION For the foregoing reasons, we affirm the decision of the Board dismissing Nauset’s appeal. AFFIRMED COSTS No costs.