Construction contractors that have litigated delay claims probably know, all too well, that Government attorneys will exploit any opportunity to dismiss a claim on summary judgment, particularly when a release is involved.  Such was the case in the recent ASBCA decision of Alderman Building Company, Inc., where the contractor’s claims were able to survive a dismissal even though it had executed a final release, and even though the contractor’s reservation of claims from that release were negotiated with two Navy civilians who likely did not have the authority to agree upon such a reservation.

The case involves a pass through claim, sponsored by Alderman, on behalf of its electrical subcontractor, Big John’s Electric Co., for $20,518.  The contract work involved renovations and repairs to buildings systems at Camp LeJeune.  The work was scheduled to begin in the spring of 2009 but, for reasons that are not clear from the opinion, did not start until February of 2010.

Alderman’s claim asserted delay and acceleration of Big John’s work for which the Government was responsible. In addition, Alderman asserted that the Navy had breached a “settlement agreement” regarding the scope of a release Alderman executed in connection with the final payment.  In support, Alderman submitted to the Board an e-mail exchange between its Project Manager and a Navy civilian working on the project.  In this exchange, the subject of which was “Final Payment,” Alderman’s Project Manager states:  “If we pursue the claim issue it will be in court and our closing out the project will not affect our ability to proceed with the [contracting officer's final decision] letter.”  Alderman’s PM then asked the Navy civilian to confirm this understanding, which he did, in writing.

Alderman also submitted to the Board affidavits of its project manager and president, both of whom stated that the Navy had specifically agreed that “Alderman had excepted its claims and issues related to the push-back of the contract start date from the project…close-out documents, including the release.”

The Navy’s initial position was that the release signed by Alderman barred its claims.  It stressed the terms of the final release, which it argued were unambiguous and should be interpreted by plain meaning, without resort to extrinsic evidence.  After Alderman’s opposition papers were filed, the Navy conceded in its reply that there was a “material factual dispute” regarding whether one element of Alderman’s claim, specifically, for unabsorbed overhead, was released in the signed final release.

In reviewing the evidence, the Board concluded:

We agree that the e-mail exchange and the accompanying affidavits . . . as well as the Navy’s concession, raise a genuine issue of material fact, precluding summary judgment regarding the finality of the release.

What does this tell us?  Perhaps most important, that contemporaneous documentation of an agreement (e.g., e-mail, serial letter), supported by post-hoc affidavits, may (and I emphasize “may”) allow a contractor to survive a motion to dismiss based upon a final or broadly worded release that does not contain specific reservation language within its express terms.  That said, contractors should not count on being as fortunate as was Alderman here.  The Board specifically noted that, although there was sufficient proof to create a genuine issue of material fact regarding the agreement between Alderman and the Navy, the terms of the exception to the release “cannot be extracted from the e-mails,” and, further, that the PM’s affidavit, which spoke of the agreement concerning “claims, which included those related to the push-back of the contract start-date,” was a “phrase that begs the question of the scope of any exception.”

If and when Alderman reaches a hearing, it will also face the issue of whether the Navy personnel who assertedly agreed to except the claim from release had the authority to do so, which the Board stated “the record leaves open.”  Here, the Board forewarned:  “It is hornbook law that ‘[a] contract with the United States…requires that the Government representative who entered or ratified the agreement had actual authority to bind the United States.’”

In sum, this case allows for cautious, guarded and careful optimism regarding factual circumstances that were particularly favorable to the contractor.  No doubt the next time, Alderman will create an irrefutable record of its exception, and do so through a written agreement with the Contracting Officer or personnel whose authority to negotiate contract terms is clearly established.

http://www.blackfordforum.com/2013/08/21/e-mails-may-save-you-from-a-release-but-dont-count-on-it/

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