In a dispute over the termination for default of mission orders for cargo delivery, the Court of Federal Claims found that further discovery was required to establish how the government’s shipments went missing and whether and to what extent the contractor should be held liable, and whether the contracting officer’s decision to terminate the mission orders instead of designating the shipments as lost was motivated by animus towards the contractor. The court denied the plaintiff’s allegation the government had warranted the performance of Afghan security forces, finding the contract explicitly disavowed such a warranty. The court also denied the plaintiff’s motion for summary judgment on the government’s counterclaims, finding that the payment of invoices did not preclude the government from seeking recovery of improper payments and that the contractor had provided no evidence the government unreasonably delayed seeking reimbursement.

Vanquish Worldwide LLC appealed U.S. Transportation Command’s termination for cause of 12 transportation missions assigned to it under its contract for trucking and logistics services. Vanquish argued the terminations were not based on solid evidence and moved the court to convert the partial termination for cause to a termination for convenience.

USTRANSCOM executed two IDIQ contract with Vanquish under which Vanquish would provide trucking services in support of U.S. military operations in Afghanistan. To order trucking services, the government issued transportation movement requests (TMRs). For administrative purposes, the distances covered by a TMR would be expressed in terms of “mission units,” with one mission unit allowed for every 50 km of distance travelled within Afghanistan. The contract required the contractor to ensure that all missions have security support, unless otherwise specified by the government, and to specify whether that support would be provided by either the US or Afghan government. Under the contract, Vanquish agreed to assume responsibility for acts of non-USG security elements that result in loss of cargo or damage to private or personal property.

Between August 27, 2015, and September 30, 2015, the government issued twelve TMRs to Vanquish. On October 6, 2015, USTRANSCOM received an email from Emporium International Transportation Services, who purported to be Vanquish’s subcontractor. Emporium stated that Vanquish had not paid it for more than 6 months and that it had ongoing missions that needed to be delivered. Emporium asked to deliver the missions directly to US personnel, due to its concern that Vanquish would not pay for the work. At the agency’s request, Emporium provided documents showing the 12 TMRs issued to Vanquish in the previous weeks.

The agency attempted to have Vanquish resolve this issue, but was unsuccessful. Emporium advised the agency that it would not be able to deliver the TMRs due to lack of funds. The CO advised Vanquish to deliver the missions by November 4. Vanquish then alleged that Emporium had subcontracted the missions to a third firm, which it failed to pay, causing the delay in delivery. The contractor assured the agency that it was working on a solution, but the TMRs remained undelivered.

On November 10, the agency issued a cure notice, advising Vanquish to deliver the missions within 48 hours. In response, Vanquish argued it should be given a 10-day period to cure and set forth an action plan to assure performance, including terminating Emporium as a subcontractor. The agency then gave Vanquish until November 20 to deliver the cargo.

On November 18, Vanquish asked for another extension and suggested the cargo was misdelivered and would be difficult to obtain without bribery. By November 24, the government had still not received the cargo. The CO placed all of Vanquish’s outstanding invoices on hold pending delivery of the cargo. For the next month, the cargo remained missing.

On December 24, Vanquish asserted it did not know the status of the cargo and suggested it could be lost. Vanquish also suggested that the Afghan Public Protection Force could have the cargo and that APPF should pay the government for its loss. However, in previous communication, Vanquish indicated the cargo was not under APPF protection at the time of its disappearance. On January 7, 2016, Vanquish formally notified USTRANSCOM that the missing TMRs had been lost or destroyed as a result of a combat loss while in the care, custody, and control of APPF.

In response, the CO asserted the contract rendered Vanquish financially liable for the replacement value of the cargo. Vanquish took issue with this assertion, arguing the CO seemed intent on damaging Vanquish’s business prospects and employees. Vanquish again asserted that the cargo was under the control of the APPF when it went missing and blamed the situation on a combat loss. The CO soon issued a termination for cause of the twelve TMRs.

Ultimately, the government recovered the cargo shipped under the twelve TMRs without Vanquish’s further involvement. Because the shipments were ultimately recovered, the government did not assert a claim for damages related to the shipments. The government also did not pursue a claim for reprocurement costs because the shipments were ultimately moved by other contractors at cheaper rates.

In its complaint, Vanquish argued that by requiring it to use APPF for security, the government warranted that APPF was capable of securing the cargo for its missions and that its inability to do so was a breach of the government’s warranty under the contract. Vanquish also argued that the government’s termination of the twelve TMRs for cause was arbitrary and an abuse of discretion because it was based on the erroneous assumption that the cargo had been lost, when in fact it had been hijacked, and because the delay in the government’s receipt of the cargo was the result of events beyond Vanquish’s reasonable control and without Vanquish’s fault or negligence. Finally, the plaintiff alleged that the CO’s decision to terminate the twelve missions for cause was made in bad faith and with a specific intent to harm Vanquish. In response, the government asserted nine counterclaims, and both parties later moved for summary judgment.

The government moved for summary judgment on Count I, the allegation that it warranted APPF’s ability to secure Vanquish’s cargo, arguing that it never provided such a warranty and that Vanquish failed to provide any evidence APPF was ever hired to perform any services on the twelve missions at issue.

The court agreed, first finding no evidence Vanquish had ever hired APPF for these missions. Further, even assuming Vanquish’s allegations were true, the court found no merit to its argument that the government had warranted APPF’s performance. While the TMRs required Vanquish to provide security through the Afghan government, the contract disclaimed any warranty of performance. In fact, the contract placed squarely on the contractor the responsibility for acts of non-US government security elements that result in a loss or damage to cargo or private property. Because no meeting of the minds occurred to form an implied warranty, the court granted the government’s motion for summary judgment on Count I.

Vanquish moved for summary judgment on Count II, which challenged the default termination of the twelve missions as lacking a reasonable contract-related basis. According to Vanquish, the failure to deliver the twelve shipments cannot be considered a breach of the contract because the contract acknowledged that such failures would occur, given that the deliveries would take place in a war zone. Vanquish explained that the minimum performance threshold for contractually required delivery dates was 90 percent, and argued that this threshold reflected the parties’ recognition “that there would be failed missions…in the war-zone of Afghanistan.” According to Vanquish, it was unreasonable for the government to terminate the 12 missions for default because its performance on the contract overall met the minimum performance standards for on-time delivery of shipments.

The court found this argument meritless, first noting that the contract incorporated FAR language stating that the government could terminate the contract if the contractor failed to provide assurance of future performance. While Vanquish’s overall performance on the contract met the minimum performance standards, this did not preclude USTRANSCOM from terminating the 12 individual missions for default.

Further, Vanquish’s failure to meet the required delivery dates for these missions was not the sole reason USTRANSCOM terminated the missions. Vanquish did not merely fail to make timely delivery of the shipments. USTRANSCOM terminated the contract for default because it believed that Vanquish had lost control over the cargo and because—despite repeated opportunities—it was unable to provide the government with any assurances as to when (if at all) the shipments would be delivered. To the contrary, it eventually advised USTRANSCOM that the shipments were lost. Because the contract did not prevent the government from terminating the individual missions, the court denied Vanquish’s motion for summary judgment.

The government also moved for summary judgment on Count II, arguing that it is undisputed that Vanquish was assigned and accepted the twelve missions at issue; that its representatives took custody of the cargo; and that Vanquish then failed to deliver the cargo.

The court agreed that Vanquish accepted the missions and that its representatives took possession of the TMRs. However, the court found it unclear who presented the TMRs at the pick-up site and took possession of the shipments. Specifically, the court found it unclear whether the shipments were picked up by Emporium and then fell into the hands of its subcontractor, or whether the subcontractor picked up the shipments. The court also found it unclear who held the shipments and for how long.

Vanquish claimed the shipments were being held by APPF, but the record showed at least some of the shipments were recovered during an undercover theft investigation conducted by SIGAR and local Afghan law enforcement. The court acknowledged that the shipments occurred in a war zone, where violence, theft, and hijackings might not be unusual. However, to the extent that the actions or inactions of Emporium were responsible for the cargo falling into the hands of unauthorized third parties, Emporium’s negligence or fault would be attributable to Vanquish for purposes of the contract, even in the absence of actual fault or negligence on Vanquish’s part.

The record as currently developed suggested that the shipments were not delivered because of a payment dispute between Vanquish and Emporium, and/or because Emporium improperly entrusted the shipments to an unauthorized subcontractor. Under either circumstance, the court found it difficult for Vanquish to demonstrate that its failure to ensure the delivery of the cargo was due to circumstances beyond its control.

However, the court found it premature to resolve the issue, as some facts remained in doubt. Accordingly, the court denied without prejudice the government’s motion for summary judgment as to Count II of Vanquish’s complaint because the motion was prematurely filed, before Vanquish had any opportunity for discovery. Once discovery is completed, the court allowed it could reconsider this motion.

Next, the government moved for summary judgment on Count III, the allegation that the termination was based on bad faith and specific intent to harm Vanquish. The government argued that the subjective motivations or bad faith of a CO are irrelevant to whether a termination for default is arbitrary, capricious, or an abuse of authority. According to the government, if it was objectively reasonable for the CO to terminate the twelve missions for cause, the contracting officer’s motivation for doing so is irrelevant.

However, the court noted that a CO is not required to terminate a contract based on an unexcused default, but merely has the discretion to do so. The CO may not use default as a pretext for terminating a contract for reasons unrelated to performance.

In its complaint, Vanquish alleged a variety of bad faith acts, including the agency’s efforts to block Vanquish from receiving award of a contract, improper allocations of missions and improper suspensions on its contracts, refusing to award Vanquish option year work on its current IDIQ, and terminating for cause the 12 TMRs. However, the court found no direct evidence to substantiate the allegations. In fact, the evidence submitted by the government, including a series of emails in which agency officials tried to work with Vanquish to secure delivery of the cargo, reflected instead the government’s good faith efforts to give Vanquish time to perform. The communications also provided a reasonable performance-based justification for the default termination.

Nonetheless, the court found that Vanquish had not yet had a chance to conduct discovery regarding the CO’s decision to terminate for default. It has not, for example, had the opportunity to probe the reasons why the contracting officer decided to terminate the twelve missions for cause rather than using an alternative, such as designating the 12 TMRs as failed missions. Accordingly, the court denied the motion for summary judgment without prejudice, allowing that it could consider the motion further after discovery.

Next, Vanquish filed a motion for partial summary judgment on seven of the government’s nine counterclaims. The first set of claims alleged Vanquish overbilled the government. Counterclaims one and five sought damages for security services Vanquish did not provide but still billed to the government. Counterclaim four sought reimbursement of excessive amounts billed for canceled missions. In counterclaim eight, the government alleged Vanquish overbilled the government by using the wrong rate on certain invoices.

Vanquish argued, in short, that the payment of the disputed invoices foreclosed any subsequent effort by the government to collect amounts erroneously paid. The court found this argument without merit. In its reply, Vanquish attempted recast its argument, dropping its argument that the government is bound by the actions of its representatives, even if erroneous, and instead disputing that the amounts were paid in error. However, because this argument was not presented in its opening brief, the court declined to address them and denied the motion for summary judgment.

Next, Vanquish moved for summary judgment on counterclaims one, three, four, and eight because the government allegedly did not exercise its post acceptance rights within a reasonable time after the alleged defects in Vanquish’s performance were known or should have been known. Vanquish argued the delay was especially problematic given that performance occurred in a war zone, an environment where the passage of time would make it difficult for Vanquish to obtain additional substantiation of performance and costs.

However, the court found Vanquish provided no facts identifying when the government knew or should have known of the defects that provide the basis for its counterclaims. Nor had it provided a factual predicate for what steps, if any, the government took to attempt to recoup the overpayments it alleged. And finally, the court found nothing in the record addressing the extent to which any delay in time between the discovery of the defects and the government’s response was or was not reasonable. Further, the CO’s declarations suggest he did act promptly to notify Vanquish of the alleged defects. Accordingly, the court denied Vanquish’s motion for summary judgment for lack of merit.

The government’s seventh counterclaim alleged that Vanquish lost cargo entrusted to its care through three of the TMRs in dispute and seeks $59,556 in damages, plus interest. The discrepancies in the cargo for those three TMRs were discovered in December 2014, March 2015, and June 2015, but the government did not notify Vanquish of its claims on these three shipments until 10–16 months after their discovery. The contract rendered the contractor financially liable for the replacement of lost or damaged cargo. However, the Defense Transportation Regulation provides that for non-classified or non-protected shipments, the contractor would be notified of theft or damage within three business days of discovery.

Vanquish argued that the time limits specified in the DTR for notifying it of a claim for lost or damaged cargo were incorporated into the contract and that the government’s delay precludes it from pressing its seventh counterclaim. In response, the government argued that the DTR is merely a “guidance document” that is not intended to benefit contractors and that such provisions supply no remedy for private parties in a judicial forum.

However, the court found Vanquish had the better argument, finding the DTR language was incorporated explicitly into the contract and is part of the section on “Claims Liability.” Further, the court held the provision in the DTR at issue could not be fairly characterized as a “guidance document.” For instance, it establishes mandatory time limits and procedures for resolving claims for damage to government cargo. The court found the DTR provisions at issue are mandatory and not merely cautionary. Accordingly, the court granted Vanquish’s motion for summary judgment on this counterclaim.

Vanquish Worldwide LLC is represented by Michael D. Maloney and William A. Wozniak of Williams Mullen P.C., and by Todd W. Miller of Miller & Miller, LLC. The government is represented by James W. Poirier, Trial Attorney, Commercial Litigation Branch, Civil Division, Department of Justice, Washington, DC, with whom were Franklin E. White, Jr., Assistant Director, Robert E. Kirschman, Jr., Director, and Chad A. Readler, Acting Assistant Attorney General.