Spearman Corporation Marysville Division v. The Boeing Company

Opinion

6 UNITED STATES DISTRICT COURT 7 WESTERN DISTRICT OF WASHINGTON

9 SPEARMAN CORPORATION Case No. C20-13RSM 10 MARYSVILLE DIVISION and SPEARMAN 11 CORPORATION KENT DIVISION, ORDER GRANTING IN PART BOEING’S MOTION FOR SUMMARY JUDGMENT 12 Plaintiffs, 13 v. 14 THE BOEING COMPANY, 15 16 Defendant.

18 This case comes before the Court on Defendant Boeing’s Motion for Summary 19 Judgment. Dkt #137. Plaintiffs Spearman Corporation and Spearman Corporation Kent 20 Division (“Spearman”) oppose. Dkt. #166. The Court has determined that it can rule without 21 22 oral argument. For the following reasons, the Court GRANTS IN PART Boeing’s Motion, 23 dismisses certain claims as stated below, and DENIES partial summary judgment on a 24 counterclaim for unpaid invoices. 25 II. BACKGROUND 26 Spearman and Boeing had a business relationship that soured. The briefing takes many 27 28 pages to present the various ways this happened, often going above and beyond what is necessary for the Court, including some facts that serve no apparent purpose other than to 1 2 embarrass the opposing party. The Court will focus on the claims and those facts necessary to 3 rule on the instant Motion. 4 This is a contract dispute. Defendant Boeing is a commercial and defense aerospace 5 manufacturer. From 1988 through 2002, Alex Spearman worked closely with Boeing in an 6 executive role for a parts manufacturing company called QPM Aerospace. In 2013, he formed 7 8 Spearman Corporation here in Western Washington and began obtaining the necessary 9 certifications and approvals to supply aircraft parts to Boeing. During the relevant time period, 10 Spearman had Marysville and Kent divisions that separately contracted with Boeing.1 11 Boeing uses a standard set of contracts with its suppliers. According to Boeing 12 13 procurement agent James Sand, these include: 14  Initial Emergent Offload (“EO”) agreements, which allow Boeing to purchase 15 small quantities of parts for a short period of time. Dkt. #141 (“Sand Decl.”), ¶ 16 7. New suppliers often start out with these. 17  Larger framework agreements, which in the case of Spearman consisted of a 18 19 General Terms Agreement (“GTA”) and a Special Business Provisions 20 agreement (“SBP”). Id. at ¶ 6. The GTA and SBP are the typical contracts used 21 by the Parts and Assemblies group for supply relationships that are anticipated to 22 be longer term, typically three to five years, but sometimes shorter or longer. Id. 23 24 GTA and SBP agreements signed by the parties have been submitted into the 25 record. See Sand Decl., Ex. 1 and Ex. 2. 26

27 1 The distinction between Spearman Corporation, Spearman Marysville, and Spearman Kent is blurred by the parties. See, e.g., Spearman’s Response Brief, Dkt. #166 at 2 (“Boeing awarded $50 million in 5-year requirements 28 contracts to a startup local machine shop, Spearman Corporation and Spearman Corporation Kent Division (‘Spearman Kent’) (collectively ‘Spearman’).”  Requests for Quotation (“RFQ”s), which indicate that any work awarded from a 1 2 bid submitted by a supplier will be subject to the GTA and SBP with the 3 supplier. Id. at ¶ 8. Sometimes bids from suppliers will contain proposed 4 changes to the GTA or SBP. Id. 5  Award letters, which are issued after a successful supplier’s bid. These letters 6 7 set forth the terms of a formal contractual offer for the purchase of particular 8 parts, at a particular price, and subject to a Reorder Lead Time (“ROLT”), which 9 reflects the duration of time within which a supplier must deliver parts after 10 receiving a purchase order from Boeing. Id. at ¶ 9. If the Award Letter is 11 accepted (signed by the supplier), then the terms of that award letter are 12 13 incorporated into the SBP between the supplier and Boeing and that award will 14 become part of the supplier’s statement of work (“SOW”) for Boeing. Id. 15  Purchase Orders (“PO”s) are issued later and govern Boeing’s actual 16 commitment to purchase a specific number of parts. Id. An award letter 17 typically does not commit to the purchase of a specific number of parts but as 18 19 many as may be required during a period of time. Id. 20 Spearman Marysville and Boeing signed an EO Agreement in October 2014. Dkt. #139- 21 1 (“Sp. 30(b)(6) Dep.”), 18:10-24. In August of 2016 Boeing ordered 24 “rib post” parts. Id. at 22 177:10-178:25; Sand Decl., Ex. 3. In the fall of 2015 Boeing gave Spearman Marysville an 23 24 opportunity to respond to several RFQs, including (1) the “737 MAX” package, and (2) 25 something called the “Rib Post” package. During that process, Boeing shared “pro forma” 26 copies of the GTA and SBP that would govern the supplier relationship if either package was 27 awarded. Sp. 30(b)(6) Dep. at 19:22-21:21; see also Sand Decl., Ex. 5. 28 In January 2016, Boeing awarded the 737 MAX package to Spearman Marysville. 1 2 Shortly thereafter, Spearman Marysville received execution versions of the GTA and SBP. The 3 parties signed the agreements on February 2, 2016. See Sand. Decl. Ex. 1 at 39; Sand. Decl. Ex. 4 2 at 58. The GTA and SBP applied generally to all future work between the signing parties. 5 Based on Spearman’s submissions and representations as to its finances and capabilities, Boeing 6 made 16 additional awards to Spearman Marysville after the 737 MAX package. Sand Decl. at 7 8 ¶ 11. Despite the original EO order, Boeing did not award Spearman the Rib Post package. 9 Dkt. #143 (“Kulezsa Decl.”), ¶¶ 5-6 & Ex. 1. Spearman Kent was added as a party to the SBP 10 at the end of October 2017; before that time, it acted as a sub-tier supplier to Spearman 11 Marysville. Sand Decl. ¶ 11. 12 13 The relationship eventually soured, leading to the termination of these contracts and the 14 underlying allegations of Plaintiffs’ claims. Records of chat messages between Boeing 15 employees produced in discovery clearly indicate some degree of animosity between the parties. 16 See Dkt. #166 at 4–5 (citing Dkt. #176-2 (filed under seal)). At times these chat messages are 17 unprofessional. In any event, Boeing argues that Spearman repeatedly failed to make deliveries 18 19 on time. Spearman admits that at least some of its deliveries were late, and that it was 20 responsible for certain late deliveries. See Sp. 30(b)(6) Dep. at 228:11-21, 230:24-234:7. 21 Boeing had to find other sources for these parts. 22 In September 2017, Spearman informed Boeing of its intent to close the Marysville 23 facility and consolidate all manufacturing work in Kent. Dkt. #142 (“Orvold Decl.”), ¶ 20. The 24 25 consolidation plan was discussed throughout fall 2017. Id. Following a site visit, Ms. Orvold, a 26 Boeing Procurement Agent, sent an email attaching a presentation from the previous day’s visit 27 to Spearman personnel. Id. at ¶ 22 & Ex. 17. The email recipients included several high-level 28 individuals at Spearman, as well as Boeing’s primary contacts at Spearman—the Contract 1 2 Administrator and Quality Manager. Id. Apparently, these last two individuals were not aware 3 of the consolidation plan. The email in question includes a long list of bullet points discussing 4 several facets of the business relationship between Boeing and Spearman under the applicable 5 contracts. See id. 6 Boeing issued a principal default letter for Spearman’s delivery delays in August 2017 7 8 and in the fall of 2017 cancelled portions of Spearman’s statement of work. See Dkt. #142 9 (“Orvold Decl.”), ¶¶ 12, 19 & Ex. 8. Boeing issued a final Notice of Cancellation in June of 10 2018. Sand Decl. at ¶ 29 & Ex. 18. 11 Boeing cites to the following provisions of the governing GTA and SBP agreements, 12 13 Sand Decl., Ex. 1 and Ex. 2: 14  Default cancellation (GTA §§ 4.1, 13.1(B), 13.2). Events of default include failure to 15 deliver parts on time (absent excusable delay) or to pay debts as due. Boeing may cancel 16 all or any portion of any order or the entire GTA or SBP for any event of default. 17  Termination for convenience (GTA § 12). Boeing may terminate an order at any time, 18 19 subject to the supplier’s right to recover appropriate compensation through a settlement 20 claims process. 21  Reporting provisions (GTA § 4.1; SBP §§ 14.1, 14.5, 35.2). A supplier must provide 22 Boeing with status reports and financial information and promptly notify Boeing of 23 24 problems that could impact timely delivery (with an accompanying recovery plan). 25  Reservation of rights notwithstanding forbearance (GTA § 29). Boeing can delay or 26 forgo remedies without waiving them. For instance, Boeing may give a supplier an 27 28 opportunity to cure its prior contractual breaches without waiving the right to cancel the 1 2 parties’ contracts as a result of those breaches. 3 This action was filed by Spearman on December 23, 2019, in King County Superior 4 Court, Dkt. #1-1, and removed to this Court on January 3, 2020, Dkt. #1. Plaintiffs’ Amended 5 Complaint seeks a declaratory judgment that the GTA and SBP contracts fail of their essential 6 purpose and are unconscionable. Plaintiff also brings causes of action for breach of contract, 7 8 breach of the duty of good faith and fair dealing, and violation of the Washington Consumer 9 Protection Act (“CPA”). Dkt. #47. The Court dismissed Plaintiffs’ CPA claim on January 14, 10 2021. Dkt. #63. 11 Boeing now moves to dismiss Spearman’s remaining claims and for a ruling that 12 13 Spearman breached its contractual obligations. Dkt. #137. Boeing also seeks summary 14 judgment on a counterclaim to recover for unpaid invoices totaling $379,687.40. See Dkt. #70, 15 Dkt. #137 at 25 (citing Sand Decl. ¶ 31 & Ex. 24; SBP § 27.1; GTA § 13.2 (E)). Boeing asks 16 the Court to reserve for trial the amount of damages otherwise owed on its breach of contract 17 counterclaim. 18 20 A. Legal Standard for Summary Judgment 21 Summary judgment is appropriate where “the movant shows that there is no genuine 22 dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. 23 R. Civ. P. 56(a); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986). Material facts are 24 25 those which might affect the outcome of the suit under governing law. Anderson, 477 U.S. at 26 248. In ruling on summary judgment, a court does not weigh evidence to determine the truth of 27 the matter, but “only determine[s] whether there is a genuine issue for trial.” Crane v. Conoco, 28 Inc., 41 F.3d 547, 549 (9th Cir. 1994) (citing Federal Deposit Ins. Corp. v. O’Melveny & 1 2 Meyers, 969 F.2d 744, 747 (9th Cir. 1992)). 3 On a motion for summary judgment, the court views the evidence and draws inferences 4 in the light most favorable to the non-moving party. Anderson, 477 U.S. at 255; Sullivan v. U.S. 5 Dep't of the Navy, 365 F.3d 827, 832 (9th Cir. 2004). The Court must draw all reasonable 6 inferences in favor of the non-moving party. See O’Melveny & Meyers, 969 F.2d at 747, rev’d 7 8 on other grounds, 512 U.S. 79 (1994). However, the nonmoving party must make a “sufficient 9 showing on an essential element of her case with respect to which she has the burden of proof” 10 to survive summary judgment. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). 11 B. Procedural and Substantive Unconscionability 12 13 Spearman seeks a declaratory judgment finding the GTA and SBA unconscionable. 14 Under Washington law, unconscionability is a question of law for the Court to decide. 15 Nelson v. McGoldrick, 127 Wn.2d 124, 131, 896 P.2d 1258 (1995). It is analyzed in terms of 16 “procedural” unconscionability and “substantive” unconscionability. Id. The plaintiff bears the 17 burden to prove unconscionability. See Hoober v. Movement Mortg., LLC, 382 F. Supp. 3d 18 19 1148, 1155 (W.D. Wash. 2019). 20 To determine procedural unconscionability, the Court looks to the circumstances of 21 contract formation, including: “(1) the manner in which the parties entered into the contract, (2) 22 whether the parties had a reasonable opportunity to understand the terms of the contract, and (3) 23 whether the important terms were hidden in a maze of fine print.” Am. Nursery Prod., Inc. v. 24 25 Indian Wells Orchards, 115 Wn.2d 217, 222, 797 P.2d 477 (1990). Spearman points to the 26 following comment to the UCC: “The basic test is whether, in the light of the general 27 commercial background and the commercial needs of the particular trade or case, the clauses 28 involved are so one-sided as to be unconscionable under the circumstances existing at the time 1 2 of the making of the contract.” Dkt. #166 at 8 (citing RCW § 62A.2-302 cmt. 1). 3 Spearman does not discuss the manner in which the parties entered into the contract or 4 whether it had a reasonable opportunity to understand the terms. Instead, Spearman argues it 5 had no meaningful choice to negotiate the terms because this was a take-it-or-leave-it contract 6 between a small supplier and a giant of the industry. Dkt. #166 at 8–9. Lack of bargaining 7 8 power alone is typically insufficient to show procedural unconscionability. UT SEE Zuver v. 9 Airtouch Commc’ns, Inc., 153 Wn.2d 293, 306, 103 P.3d 753, 761 (2004). The undisputed 10 record clearly shows that Spearman and its CEO were no strangers to this industry, to Boeing, 11 or even to this kind of contract. Spearman has failed to present any evidence to suggest it did 12 13 not have a reasonable opportunity to understand the terms of the contracts. There is no genuine 14 dispute of fact related to this claim and Spearman has failed to prove procedural 15 unconscionability as a matter of law. 16 “Substantive unconscionability involves those cases where a clause or term in the 17 contract is alleged to be onesided or overly harsh.” Nelson, 127 Wn.2d at 131. “‘Shocking to 18 19 the conscience,’ ‘monstrously harsh,’ and ‘exceedingly calloused’ are terms sometimes used to 20 define substantive unconscionability.” Nelson, 127 Wn.2d at 131 (quoting Montgomery Ward 21 & Co. v. Annuity Bd. of S. Baptist Convention, 16 Wn. App. 439, 444, 556 P.2d 552 (1976)). 22 Spearman spends one or two sentences arguing these contracts are substantively 23 unconscionable. Dkt. #166 at 9. This level of argument is simply insufficient to satisfy the 24 25 above test. While it is true that the contracts at issue give Boeing almost all the power in the 26 relationship, they also offer a process for suppliers to correct mistakes or to appeal decisions. 27 The Court declines to find them substantively unconscionable as a matter of law on these facts. 28 Spearman also alleges the contracts fail of their essential purpose, arguing that Boeing 1 2 does not comply with its termination claims process “as a matter of policy or practice.” FAC ¶ 3 132(e). Spearman goes on to say that the claims settlement process following termination for 4 convenience fails of its essential purpose because Boeing requires suppliers to sign a settlement 5 form as a prerequisite to payment, and reserves the right to pay amounts below those set out in 6 the Federal Acquisition Regulations (“FARs”). Id. ¶¶ 133-36. This claim is not argued in 7 8 Spearman’s Response brief. Spearman has failed to present the Court with information about 9 the application of these contracts with other suppliers and therefore declines to issue a 10 declaratory judgment as to Boeing’s policies or practices in general. The Court agrees with 11 Boeing that the facts alleged as to Spearman, even if true, do not rise to the level required to 12 13 show the contract failing for its essential purpose. See Dkt. #137 at 13–14. 14 C. Breach of Contract Claim 15 1. Contract Claim for “Rib Post” Package 16 The statute of frauds states that contracts for the sale of goods are not enforceable absent 17 a signed writing between the parties. RCW 62A.2-201(1); Alaska Indep. Fishermen’s Mktg. 18 19 Ass’n v. New England Fish Co., 548 P.2d 348, 351-52 (Wash. Ct. App. 1976). 20 Boeing argues it did not award the so-called Rib Post package to Spearman, as alleged in 21 the Amended Complaint. Dkt. #137 at 14 (citing Kulesza Decl. ¶¶ 3-6 & Ex. 1; Gellert Decl., 22 Ex. 5 (Frankland Decl.) ¶¶ 11, 15). Spearman concedes that the parties never entered a written 23 contract for this package. See Sp. 30(b)(6) Dep. at 122:8-123:6, 132:22-133:5, 206:22-207:2. 24 25 Instead, Spearman points to emails. Many of these emails reflect a “temporary offload” or 26 “emergent offload” rather than the award of a package under Boeing’s unique and at times 27 confusing contract system with suppliers. Other emails presented by Spearman are internal to 28 Boeing, i.e. they were not sent to Spearman. The Court finds that Spearman has failed to 1 2 present evidence indicating a final agreement to be bound, communicated between the parties. 3 Accordingly, the Court finds there is no genuine dispute of material fact. This claim is properly 4 dismissed on summary judgment. 5 2. Breach of Confidentiality 6 Spearman alleges that Boeing breached the GTA and/or a separate Proprietary 7 8 Information Agreement (“PIA”) by disclosing Spearman’s future consolidation plans to two 9 Spearman employees, i.e. revealing that they and their colleagues were about to lose their jobs. 10 Boeing argues the record cannot support a breach of confidentiality claim “both because the 11 consolidation plan was not protected from disclosure by the GTA or the PIA, and because 12 13 Boeing did not disclose the plan to any outside party.” Dkt. #137 at 19. 14 The GTA requires Boeing to “keep confidential and protect from disclosure all . . . 15 confidential, proprietary, and/or trade secret information . . . (collectively referred to as 16 ‘Proprietary Information and Materials’).” Sand Decl., Ex. 1, GTA § 20.0. The next sentence 17 states “Boeing and [Spearman] shall each use Proprietary Information and Materials of the other 18 19 only in the performance of and for the purpose of this Agreement and/or any Order.” Id. 20 Boeing and “Spearman Corporation” also entered into a Proprietary Information Agreement 21 (“PIA”), which says “each Party agrees that it will preserve in confidence, not disclose to 22 others, and not use… any and all Proprietary Information received from the other Party [with 23 certain limitations.]” Dkt. #141-1 at 202. Boeing is permitted to use such information “for the 24 25 purpose of purchase, and/or manufacture of commercial airplane parts.” Id. 26 27 28 Spearman claims it warned Boeing that its Marysville employees were unaware of the 1 2 consolidation plans, and argues that such information was confidential. Dkt. #166 at 15 (citing 3 Schoeggl Decl. ¶ 4; Ex. B [Sp. 30(b)(6) Dep. at 698]). 4 Spearman may have been damaged by the disclosure, but it has failed to convince the 5 Court that what happened here could constitute a breach of the GTA or the PIA. There is no 6 material dispute as to the nature of the communication. This was not a broadcast to the 7 8 Spearman workforce or even an email sent to the wrong person by mistake—this was a 9 communication from a Boeing employee to her contacts at Spearman about the performance 10 under the contract. The disclosure was therefore covered by the purpose and performance 11 exceptions in GTA § 20 and PIA § 2 & (A). Furthermore, the Court agrees with Boeing’s 12 13 argument that this was not a disclosure to “others” as contemplated under these agreements. 14 This claim is properly dismissed as a matter of law. 15 3. Cancellation of Further Contracts 16 Spearman contends Boeing breached their contracts by cancelling orders without 17 material justification. Boeing argues that the late delivery of parts constitutes an event of 18 19 default under the GTA, and that the record demonstrates numerous delivery failures. While 20 there appears to be a genuine dispute as to who to blame for many delivery failures, there are at 21 least some delivery delays for which Spearman admits responsibility. See, e.g., Dkt. #139-1 22 (Foster Decl., Ex. 1) at 228:11-21, 230:24-234:7 (conceding responsibility for 115W family, 23 146T and 116W); Dkt. #166 at 10 (“…only 28 of the deliveries were actually late and in ways 24 25 that are not Boeing’s own responsibility”); Dkt. #170 (Dreikorn Decl.) ¶ 5. Spearman does not 26 dispute that these delays harmed Boeing. These delays were not “slight” or “insubstantial,” as 27 28 argued in the Response brief. See Dkt. #166 at 11 (citing Colorado Structures, Inc. v. Ins. Co. 1 2 of the W., 167 P.3d 1125, 1131 (Wash. 2007)). 3 Whether or not the contract terms are one-sided, the Court has found that they are not 4 unconscionable, and, as the Court reads them, the terms above clearly permit Boeing to cancel 5 based on at least the undisputed delivery failures and other undisputed facts. Therefore, even if 6 Spearman is right about all the other disputes between the parties, Boeing was permitted to 7 8 cancel the orders and to terminate the business relationship. This claim is properly dismissed. 9 D. Breach of Good Faith and Fair Dealing 10 Under Washington law, “[t]here is in every contract an implied duty of good faith and 11 fair dealing” that “obligates the parties to cooperate with each other so that each may obtain the 12 13 full benefit of performance.” Rekhter v. Dep't of Soc. & Health Servs., 180 Wn.2d 102, 112, 14 323 P.3d 1036 (2014) (quoting Badgett v. Sec. State Bank, 116 Wn.2d 563, 569, 807 P.2d 356 15 (1991)). The implied covenant of good faith and fair dealing “cannot add or contradict express 16 contract terms and does not impose a free-floating obligation of good faith on the parties.” Id. 17 at 113. Instead, “the duty arises only in connection with terms agreed to by the parties.” Id. 18 19 (citations omitted). The duty can arise “when the contract gives one party discretionary 20 authority to determine a contract term.” Id. (quoting Goodyear Tire & Rubber Co. v. Whiteman 21 Tire, Inc., 86 Wn. App. 732, 738, 935 P.2d 628 (1997)). 22 Boeing argues this claim fails because it did not violate any term of the Agreement. 23 Dkt. #11 at 25-26. However, under Washington law, the duty of good faith and fair dealing can 24 25 arise even when there is no breach of an express contract term. See id. at 111-12 (citing to the 26 Seventh Circuit for the proposition that “it is, of course, possible to breach the implied duty of 27 good faith even while fulfilling all of the terms of the written contract”). The Washington 28 Supreme Court noted in Rekhter that, if a violation of the contract’s terms were required, 1 2 “[s]uch a requirement would render the good faith and fair dealing doctrine superfluous.” 180 3 Wn.2d at 112. 4 “There is no one-size-fits-all definition of good faith and fair dealing.” Microsoft Corp. 5 v. Motorola, Inc., 963 F. Supp. 2d 1176, 1184 (W.D. Wash. 2013). “It may violate the duty of 6 good faith and fair dealing to, for example, (1) evade the spirit of a bargain; (2) willfully render 7 8 imperfect performance; (3) interfere with or fail to cooperate in the other party’s performance; 9 (4) abuse discretion granted under the contract; or (5) perform the contract without diligence.” 10 Id. (citing RESTATEMENT (SECOND) OF CONTACTS § 205 cmt. d). 11 Spearman cannot bring such a claim with regard to Boeing’s non-approval of the plan to 12 13 transfer its contracts from the Marysville division to the Kent division. The GTA expressly 14 precludes the transfer of work to a new location unless Spearman “obtain[s] written approval 15 from Boeing prior to moving work.” GTA § 28.0. The GTA required Spearman to seek 16 approval for the transfer but did not impose a duty on Boeing to grant it. Spearman cites in 17 briefing to a Boeing employee saying the transfer required only “a simple contract change,” 18 19 Dkt. #166 at 18. Spearman fails to explain how this can be twisted into a breach of good faith 20 and fair dealing claim; Boeing’s alleged bad faith here cannot be attached a specific contractual 21 term and the claim therefore fails. 22 On the other hand, viewing the evidence and drawing all reasonable inferences in the 23 light most favorable to Spearman, there is a material dispute as to Boeing’s breach of the duty 24 25 of good faith and fair dealing in the way that it cancelled orders and contracts with Spearman 26 for default. Spearman points to many aspects of its convoluted business dealings with Boeing, 27 all governed by some contractual term. Boeing appears to repeatedly render imperfect 28 performance, evade the spirit of the bargain, and interfere with Spearman’s ability to perform. 1 2 Whether any of this rises to a breach of the above duty, or can otherwise be justified by Boeing, 3 are questions best left for the trier of fact. 4 Boeing argues “[w]here default or the election of post-default remedies is set forth in a 5 contract, those terms cannot be modified through the implied duty of good faith and fair 6 dealing.” Dkt. #137 at 21 (citing Fleetwood v. Stanley Steemer Int’l, Inc., 725 F. Supp. 2d 7 8 1258, 1274 (E.D. Wash. 2010)). This goes to damages and is more properly addressed in the 9 next section. 10 E. Spearman’s Damages are limited under the GTA and UCC 11 Boeing argues that Spearman’s damages are limited by language in the GTA. 12 13 Specifically: 14 Spearman seeks tens of millions of dollars of alleged lost profits and other consequential damages. But the GTA precludes the 15 recovery of incidental or reliance damages, lost future profits, or 16 other consequential damages for wrongful termination. Instead, Section 16.0 provides that any “wrongful cancellation shall be 17 deemed a termination [for convenience] of all or a portion of an Order pursuant to GTA Section 12.1 and therefore, Boeing’s 18 liability shall be limited to … amounts identified in GTA Section 19 12.3.” Section 12.3, in turn, provides that Spearman may submit a claim for compensation “to the extent allowed under the terms of 20 [federal regulations] as published in 48 CFR § 52.249-2,” subsections (d)-(g). Those provisions permit recovery only for 21 work performed, plus a reasonable profit thereon, and costs 22 incurred prior to termination. 48 CFR § 52.249-2(d)-(g).

23 Dkt. #137 at 22 Section 16 of the GTA not only applies to wrongful termination of an Order 24 but also to “any cancellation under GTA Section 13.0,” which refers to default of the GTA 25 caused by, e.g., “[a]ny failure by Seller to deliver Products of perform Services, in accordance 26 with the schedule requirements set forth by this Agreement or any Order except [by excusable 27 28 delay].” Spearman argues that such a limitation on recovery is prohibited under Washington law 1 2 in circumstances of “bad faith breach,” citing Scott v. Cingular Wireless, 160 Wn.2d 843, 854, 3 161 P.3d 1000, 1006 (2007). Dkt. #166 at 20–21. Boeing counters with citations to Myers v. 4 State, 218 P.3d 241 (Wash. Ct. App. 2009) and SAK & Assocs., Inc. v. Ferguson Const., Inc., 5 357 P.3d 671, 677 (Wash Ct. App. 2015), which are closer on the facts and come to the opposite 6 conclusion. Boeing argues that “[c]ontractual provisions that convert a wrongful termination 7 8 for default to a termination for convenience are common in the industry.” Dkt. #137 at 22. 9 The Court agrees with Boeing and finds Myers and SAK analogous. Spearman’s 10 available recovery for the cancellation of the orders and contract is limited by the GTA to that 11 allowed under 48 CFR § 52.249-2, subsections (d)-(g). This clause in the GTA was known to 12 13 the parties at the outset, is permitted under Washington law in private contracts, and its 14 application here does not constitute a violation of Boeing’s duty of good faith and fair dealing. 15 Having so found, the Court need not address Boeing’s argument that the UCC also bars 16 Spearman’s claim or consequential damages. 17 F. Dismissal of damages related to Makino and GROB machines 18 19 Almost as an afterthought, Boeing moves to dismiss claims for damages arising from 20 Spearman’s lease of a Makino five-axis milling machine and a GROB 5-axis milling machine. 21 Dkt. #137 at 24–25. The Court agrees with Spearman that a genuine dispute of facts preclude 22 summary judgment on this issue. See Dkt. #166 at 23–24. 23 G. Counterclaim for Unpaid Invoices 24 25 Boeing seeks to recover for unpaid invoices totaling $379,687.40. See Dkt. #70, Dkt. 26 #137 at 25 (citing Sand Decl. ¶ 31 & Ex. 24; SBP § 27.1; GTA § 13.2 (E)). 27 28 Spearman argues that there is a material dispute as to this total and that Boeing engaged 1 2 in bad faith by refusing “to allow Spearman to return the materials after he had unknowingly 3 purchased them.” Dkt. #166 at 24–25. 4 The Court has reviewed the cited deposition testimony, finds that a material dispute 5 remains as to the amount owed by Spearman under this claim, and that this precludes summary 6 judgment. This claim is best left for the trier of fact. 7 9 Having reviewed the relevant briefing and the remainder of the record, the Court hereby 10 finds and ORDERS that Boeing’s Motion for Summary Judgment, Dkt #137, is GRANTED IN 11 PART and DENIED IN PART as stated above. Plaintiff’s first and second causes of action 12 13 (declaratory judgment and breach of contract) are DISMISSED. Plaintiff’s available damages 14 for breach of good faith and fair dealing are limited as stated above. The Court declines to grant 15 summary judgment on any of Boeing’s counterclaims, finding that a genuine dispute of material 16 facts precludes summary judgment and that Boeing’s claims are best untangled by a trier of fact. 17 DATED this 18th day of July, 2022. 18

19 20 A 21 RICARDO S. MARTINEZ 22 CHIEF UNITED STATES DISTRICT JUDGE

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