Sunoco, Inc. v. United States

59 Fed. Cl. 390, 2004 U.S. Claims LEXIS 19, 2004 WL 223987
CourtUnited States Court of Federal Claims
DecidedJanuary 26, 2004
DocketNo. 02-466C
StatusPublished
Cited by3 cases

This text of 59 Fed. Cl. 390 (Sunoco, Inc. 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
Sunoco, Inc. v. United States, 59 Fed. Cl. 390, 2004 U.S. Claims LEXIS 19, 2004 WL 223987 (uscfc 2004).

Opinion

OPINION

DAMICH, Chief Judge.

I. Introduction

At issue before the Court is a Motion for Partial Summary Judgment brought by the [392]*392Defense Energy Support Center (DESC) (Defendant) and a Cross-Motion for Partial Summary Judgment brought by Sunoco, Inc. & Puerto Rico Sun Oil Company (Plaintiffs). For the reasons set forth herein, Defendant’s motion regarding its claim that EPA Clause B19.33 is illegal is DENIED. Defendant’s motion regarding the contracts in which DESC received a deviation is DENIED. Defendant’s motion regarding its claim that Plaintiffs waived their right to challenge implementation of the EPA clause is DENIED. Defendant’s motion regarding its claim that Plaintiffs failed to allege a harm is DENIED.

Plaintiffs’ cross-motion regarding the illegality of the EPA clause is GRANTED. Plaintiffs’ cross-motion regarding the illegality of the deviations is GRANTED. Plaintiffs’ cross-motion regarding their claim that Defendant’s waiver argument is insufficient is DENIED.

II. Background

Plaintiffs and Defendant had a series of long term contracts for the purchase of approximately $1.49 billion worth of military fuel between 1984 and 1999.1 Because of the frequent fluctuation in the price of oil, the contracts contained a standard price adjustment clause, Clause B19.33, known as the Economic Price Adjustment (EPA) clause. The clause permitted DESC to change the monthly price it paid Plaintiffs for fuel based on changes in certain price indexes. Prior to 1995, these price indexes were published by the Department of Energy (DOE) in the Petroleum Marketing Monthly (PMM Indexes).2 Beginning in 1995, the price indexes were based on regional average prices reported in the Platts Oilgram Price Report (Platts). The EPA clause was included in 40 of the 41 contracts at issue between Plaintiffs and the DESC.

Plaintiffs did not object to the price adjustments made pursuant to the contracts until February 21, 2001, when Plaintiffs alleged that the EPA clause was illegal. Plaintiffs submitted certified claims to DESC’s Contracting Officer that were denied on October 15, 2001. The Contracting Officer stated that DESC paid Plaintiffs exactly fair market value for the fuel supplied under the contracts. Plaintiffs appeal this final decision, seeking recovery of at least $194,891,267.89 plus interest.

III. Discussion

A. Standard of Review

Summary judgment is proper when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Rules of the Court of Federal Claims (RCFC) Rule 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S.Ct. 2505, 91 L.Ed.2d 202, (1986). A material fact is one that might significantly affect the outcome of the litigation. Anderson, 477 U.S. at 248, 106 S.Ct. 2505. If the nonmov-ant fails to make a showing sufficient to establish an element of its case on which it will bear the burden of proof at trial, the movant is entitled to summary judgment. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The court must draw all reasonable inferences in favor of the nonmovant. Anderson, 477 U.S. at 255, 106 S.Ct. 2505. When the case is before the court on cross-motions for summary judgment, each motion is evaluated under the same standard. Cubic Defense Sys., Inc. v. United States, 45 Fed.Cl. 450, 457 (1999).

Contract interpretation is a question of law. Dalton v. Cessna Aircraft Co., 98 F.3d 1298, 1305 (Fed.Cir.1996); Alaska Lumber & Pulp Co. v. Madigan, 2 F.3d 389, 392 (Fed. Cir.1993). The purpose of contract interpretation is to carry out the intent of the parties. See Gould, Inc. v. United States, 935 F.2d 1271, 1274 (Fed.Cir.1991); Alvin, Ltd. v. United States Postal Serv., 816 F.2d 1562, 1565 (Fed.Cir.1987); Hegeman-Harris & Co. v. United States, 194 Ct.Cl. 574, 440 F.2d [393]*3931009, 1014 (1971). The intention of the parties to a contract controls its interpretation. Beta Sys., Inc. v. United States, 838 F.2d 1179, 1185 (Fed.Cir.1988).

B. FAR Framework for EPA Clauses

The Federal Acquisition Regulation (FAR) authorizes the use of economic price adjustments in a fixed-price contract to “provide[ ] for [the] upward and downward revision of the stated contract price upon the occurrence of specified contingencies.” FAR § 16.203-1. The FAR deems EPA clauses to be of three general types, set forth in FAR § 16.203-1:

(a) Adjustments based on established prices. These price adjustments are based on increases or decreases from an agreed-upon level in published or otherwise established prices of specific items or the contract end items.
(b) Adjustments based on actual costs of labor or material. These price adjustments are based on increases or decreases in specified costs of labor or material that the contractor actually experiences during contract performance.
(c) Adjustments based on cost indexes of labor or material. These price adjustments are based on increases or decreases in labor or material cost standards or indexes that are specifically identified in the contract.

The particular circumstances under which an EPA clause is prohibited are addressed in FAR § 16.203-3, which acts as a provision of limitation on the use of EPA clauses. FAR § 16.203-3 states:

A fixed price contract with economic price adjustment shall not be used unless the contracting officer determines that it is necessary[,] either[:] [ (1) ] to protect the contractor and the Government against significant fluctuations in labor or material costs[;] or [ (2) ] to provide for contract price adjustment in the event of changes in the contractor’s established prices.

C. Whether the EPA Clause in Plaintiffs’ Contracts Violates the FAR

The Court begins its analysis of EPA Clause B 19.33 by noting that it is unconvinced by Plaintiffs’ briefs and oral argument presentation that the Federal Circuit decision in Barrett Refining Corp. v. United States, 242 F.3d 1055 (Fed.Cir.2001) establishes the clause’s illegality. In Barrett, the Federal Circuit affirmed the Court of Federal Claims’ grant of quantum valebant relief to plaintiff after an EPA clause contained in the supplier’s contracts with the DESC was held to be unenforceable. The Federal Circuit there did not determine the illegality of the EPA clause. Rather, it took as a given that the EPA clause was unenforceable and entered judgment accordingly in favor of the plaintiff for underpayment.

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59 Fed. Cl. 390, 2004 U.S. Claims LEXIS 19, 2004 WL 223987, Counsel Stack Legal Research, https://law.counselstack.com/opinion/sunoco-inc-v-united-states-uscfc-2004.