Evidence That Government Internally Considered Additional Modifications After the Parties Had Signed Earlier Modifications May Negate a Finding That the Earlier Modifications Were an Accord and Satisfaction of All Claims

by Pepper Hamilton LLP
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Meridian Eng’g Co. v. United States, 2018 U.S. App. LEXIS 7024 (Fed. Cir., Mar. 20, 2018)

Meridian Engineering Company (“Meridian”) was hired by the United States (“Government”) to construct flood control structures on the Chula Vista Project.  Meridian encountered what it considered to be differing site conditions on the project.  The Government issued two contract modifications in response to Meridian’s claims.  Later, structural failures occurred and the Government ultimately terminated Meridian.  Meridian filed suit in the Court of Federal Claims.

The court held that Meridian failed to establish a compensable differing site condition because the bid documents sufficiently notified contractors of potential water conditions at the site that could result in the conditions claimed.  Also, the court held that Meridian was charged with knowledge of the conditions that a pre-bid site visit would have revealed, which included the conditions in question.  The Court of Appeals affirmed the trial court on that issue.

Meridian also sought damages due to alleged specification defects that caused flood events.  The trial court denied these claims, finding them barred by the doctrine of accord and satisfaction based upon two separate bilateral contract modifications that purported to cover all added costs.  Meridian argued that there was no accord and satisfaction, citing evidence of a Government draft contract modification dealing with additional estimates for flood damage created after the two modifications were signed.  Meridian argued that this showed that the Government did not believe that the prior modifications constituted an accord and satisfaction of all claims.

The trial court held that because Meridian had not shown that it was aware of the draft modification there could be no meeting of the minds on continued negotiation and, therefore, the defense of accord and satisfaction still applied.

The Court of Appeals held that the trial court erred by solely considering whether Meridian knew of the draft modification.  The Court held that evidence of formal draft modifications negotiated between the parties is not the only evidence sufficient to defeat a finding of accord and satisfaction, and that a wide range of evidence should be considered.  The Court also noted additional evidence including, inter alia, that the Government directed Meridian to submit revised estimates for the claim after the execution of the earlier modifications; the content of the Government’s draft modification itself; that Meridian submitted additional requests for equitable adjustment after the modifications; and that the Government acknowledged receipt and planned to review those requests.  The Court held that the requests and consideration of those requests after the earlier modifications could preclude a finding that there was a meeting of the minds that all claims had been satisfied.  The Court remanded the matter back to the trial court to reconsider the issue in light of all of the evidence.

To view the full text of the court’s decision, courtesy of Lexis®, click here.

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