Contractor’s motion for partial summary judgment is granted. The contractor agreed to install energy efficient lights at government facilities. The contract provided that the contractor would be paid from the savings achieved by the new lights. The contractor’s lights, however, did not achieve the energy efficiency levels set forth in the contract. The government refused to pay the contractor’s invoices. The board found that even if the lights did not achieve the efficiency levels contemplated by the contract, the government could not completely withhold payment. Instead, the government was obligated to make partial payments for the efficiency levels that were actually achieved.
Philips Lighting North American Corporation had a contract with the Washington Metro Transit Authority (WMATA) to replace lighting fixtures in parking garages with energy efficient lighting. The contract had two phases. In the first phase, the construction phase, Philips would install the new lighting system. In the second, maintenance phase, Philips would maintain the system for ten years.
The contract provided that Philips would not be paid during the construction phase. Rather, WMATA was to pay Philips after the construction phase in semi-annual installments over the ten year maintenance period. The payments would be made from the savings achieved from the new energy efficient lighting.
Philips finished the construction phase of the project about six months after the contract deadline. The lighting system Philips installed did not achieve the energy efficiency levels set forth in the contract. WMATA refused to pay Philips’ invoices, arguing that the company had breached the contract by not delivering the system on time and not producing the efficiency promised in the contract.
Philips filed various claims attempting to resolve the dispute. WMATA denied the claims. Philips appealed to the ASBCA, which the contract designated as WMATA’s authorized representative for decisions on appeal. Philips moved for partial summary judgment on two counts of its complaint. Philips also moved to strike WMATA’s affirmative defense for liquidated damages.
Philips moved for summary judgment on Count II of its complaint, which alleged that the WMATA breached the contract by failing to pay Philips’ invoices. WMATA argued that the contract had set forth a specific amount of guaranteed energy savings. WMATA contended that achieving savings of this amount was a condition precedent to receiving payment. Because Philips had failed to achieve the guaranteed energy savings, it was not entitled to any payment.
The board disagreed with the WMATA’s interpretation of the contract. The contract provided that if energy savings for any installment were less than the installment payment for that period, then the payments would be amended to equal the actual savings. Thus, the board, reasoned, the contract contemplated variances in the installment payment amount.
To be sure, the contract referred to guaranteed energy savings. Nevertheless, the board found that guarantee only reflected the parties’ agreement that WMATA would never be required to pay more than the schedule payment. Thus, if the new lighting system was more efficient than the contract contemplated, the guarantee provided that WMATA was not obligated to pay for the extra efficiency. The guaranteed amount, however, was not a condition precedent that Philips had to meet before it was entitled to payment. WMATA’s interpretation of the contract rendered the language on amended payments superfluous.
Philips also moved for summary judgment on Count III of its complaint for breach of the duty of good faith and fair dealing. Philips alleged that WMATA had breached its implied duty by, among other things, delaying the construction phase of the contract and delaying inspection. The board found that issues of disputed fact precluded summary judgment on the good faith/fair dealing count.
In response to the complaint, WMATA asserted an affirmative defense seeking $975,000 in liquidated damages. Philips moved to strike the defense for lack of jurisdiction. The board granted the motion. The disputes clause of the contract required that any dispute had to be decided by the contracting officer in writing. Because the contracting officer had not made a written demand for liquidated damages, the board did not have jurisdiction to adjudicate what was, in effect, a government claim.
Philips is represented by Franklin C Turner, Ethan Brown, Alexander W. Major, Matthew Wright, and Cara A. Wulf of McCarter & English LLP. The government is represented by Jon B. Crocker of the Washington Metropolitan Area Transit Authority as well as Eric W. Leonard, Tracye Winfrey Howard, Douglas Dreier, and George E. Petel of Wiley Rein LLP.
