Transfair International, Inc. v. United States

54 Fed. Cl. 78, 2002 U.S. Claims LEXIS 251, 2002 WL 31113428
CourtUnited States Court of Federal Claims
DecidedSeptember 23, 2002
DocketNo. 01-608C
StatusPublished
Cited by9 cases

This text of 54 Fed. Cl. 78 (Transfair International, 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
Transfair International, Inc. v. United States, 54 Fed. Cl. 78, 2002 U.S. Claims LEXIS 251, 2002 WL 31113428 (uscfc 2002).

Opinion

OPINION

ALLEGRA, Judge:

This contract case is before the court on defendant’s motion to dismiss. Defendant claims that plaintiff is not entitled to payment for the transportation of humanitarian relief to Asmara, Eritrea, because a British subcontractor hired by plaintiff repeatedly employed Iranian airliners in violation of various provisions of Federal law. In its complaint, and again on brief, plaintiff strenuously asservates that, at the time the goods were transported, it was unaware of its subcontractor’s actions and, therefore, should not suffer the forfeiture of its agreed compensation. The court deems oral argument on defendant’s motion unnecessary. Having carefully reviewed plaintiffs complaint and the exhibits attached thereto, as well as the briefs filed by the parties, the court concludes that plaintiffs complaint states a claim under the applicable legal standards and that defendant’s motion, therefore, must be denied. As will be seen, those same legal standards require this court to weigh various facts that have not yet been established.

[79]*79I. FACTS1

The contract in question involved the delivery of humanitarian relief supplies. On June 7, 2000, the United States Agency for International Development (“USAID”) issued a Request for Proposals (“RFP”) to transport humanitarian relief supplies from Pisa, Italy to Asmara, Eritrea. The RFP required that offerors specify the name of the aircraft owner and operator, the aircraft type and flag type, the proposed delivery schedule, and the route, while providing that “U.S. flag and non-U.S. flag carriers may be offered.” On June 9, 2000, Transfair International, Inc. (“Transfair”) submitted a proposal in response to this RFP in which it indicated that it would be using either a Ukrainian or Romanian carrier to make the delivery. On June 9, 2000, USAID awarded to Transfair a fixed-price contract for transport freight services in the amount of $258,720.00. The award letter referred broadly to the terms of the RFP and Transfair’s proposal, but did not specifically address the issue of the carrier’s flag.

The contract required Transfair to secure three flights to deliver the humanitarian relief supplies between June 13 and June 16, 2000. Transfair completed the requisite deliveries on June 16, 2000. Toward this end, Transfair subcontracted its duties under the contract to Coyne Airways Ltd., a British corporation (“Coyne”). Coyne had originally planned to use a Ukrainian operator to make the delivery, but allegedly as a result of bombing near the airport in Asmara, the Ukrainian government directed that no Ukrainian aircraft could fly to Asmara. Allegedly unbeknownst to Transfair, Coyne then hired an Iranian aircraft to fulfill the contract obligations.

After the first flight’s arrival in Eritrea, USAID contacted Transfair to determine the flag of the performing aircraft and inquired whether the performing aircraft was registered as an Iranian flag. sTransfair assured USAID that the aircraft was Ukrainian, and not Iranian. After the second flight’s arrival, USAID again inquired about the aircraft’s flag, and Transfair responded that the aircraft was Ukrainian, but indicated that it would verify the flag with Coyne. After the third flight had departed for the final delivery, Transfair contacted USAID and confirmed that the performing aircraft and operator for all three flights had indeed been Iranian. Transfair allegedly was unaware of the true nationality of the aircraft until after two of the flights had been completed and the third flight was in the air.

After completing the shipments, Transfair billed USAID for the contract amount. USAID refused to pay on the grounds that Coyne’s use of an Iranian aircraft was a major breach of the contract. The agency asserted that Coyne’s illegal actions were attributable to Transfair and constituted a violation of Federal Acquisition Regulation (“FAR”) § 25.701,2 as well as Treasury Department and USAID regulations (respectively 31 C.F.R. § 560.701 and 22 C.F.R. § 228.03), all of which generally prohibited a government contractor from using an aircraft operated by a company licensed and registered in a foreign policy restricted country, such as Iran. Pursuant to the Contract Disputes Act, Transfair submitted to the contracting officer a claim in the amount of $258,720.00, plus interest, premised on two grounds: (i) quantum meruit, because Transfair performed the contract and USAID received the benefit of that performance; and (ii) a waiver argument reasoning [80]*80that because FAR § 25.701(2)(i) permits the contracting officer to waive the carrier restrictions, it should be implemented to permit payment of Transfair. Alternatively, Trans-fair asserted that the possibility of waiver indicates that violation of the regulation is only a minor and not a major breach of contract. On October 24, 2000, the contract officer denied Transfair’s claim on the basis that public policy considerations counseled against payment, which would be the equivalent of a transfer of government funds directly to an Iranian organization. The contracting officer found that subcontracting with an Iranian company was a major breach of a government contract, in part because such a contract could subject the contractor to severe civil and criminal penalties under Treasury regulations.

On October 24, 2001, plaintiff filed the instant complaint, which seeks payment of the full contract price plus interest. On March 15, 2002, defendant filed a motion to dismiss for failure to state a claim upon which relief can be granted. See RCFC 12(b)(4). A response and reply to that motion have since been filed.

II. DISCUSSION

From the dawn of the common law tradition in England, courts generally have refused to implement contractual undertakings that, when measured against prevailing mores, contravene public policy. See 1 Edward Coke, Institutes of the Laws of England: A Commentary upon Littleton 19 (Thomas ed. 1827) (“nihil quod est inconveniens est licitum”); Percy H. Winfield, “Public Policy in the English Common Law,” 42 Harv. L.Rev. 76, 79 (1928) (hereinafter ‘Winfield, Public Policy”). For its part, the Supreme Court has often applied this concept, describing it recently in the following terms: “a promise is unenforceable if the interest in its enforcement is outweighed in the circumstances by a public policy harmed by enforcement of the agreement.” Town of Newton v. Rumery, 480 U.S. 386, 392, 107 S.Ct. 1187, 94 L.Ed.2d 405 (1987); see also Crites, Inc. v. Prudential Insurance Co., 322 U.S. 408, 418, 64 S.Ct. 1075, 88 L.Ed. 1356 (1944); Weil v. Neary, 278 U.S. 160, 171-174, 49 S.Ct. 144, 73 L.Ed. 243 (1929); Woodstock Iron Co. v. Richmond & Danville Extension Co., 129 U.S. 643, 662-663, 9 S.Ct. 402, 32 L.Ed. 819 (1889). This doctrine is potentially applicable both where a bargain is illegal in its formation or its performance. See Restatement (Second) of Contracts § 512 (1979).

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Bluebook (online)
54 Fed. Cl. 78, 2002 U.S. Claims LEXIS 251, 2002 WL 31113428, Counsel Stack Legal Research, https://law.counselstack.com/opinion/transfair-international-inc-v-united-states-uscfc-2002.