PSBCA Nos. 6354, 6367, 6373, 6421, 6422


October 21, 2014         

JM CARRANZA TRUCKING CO v. UNITED STATES POSTAL SERVICE

PSBCA Nos. 6354, 6367, 6373, 6421, 6422

APPEARANCE FOR APPELLANT:
Joel D. Broida, Esq.
Broida & McKinney, P.A.

APPEARANCE FOR RESPONDENT:
Peter J. McNulty, Esq.
United States Postal Service Law Department 

OPINION OF THE BOARD

Appellant, JM Carranza Trucking Co. (Carranza Trucking), provided mail transportation services to Respondent, United States Postal Service, under two contracts. The Postal Service provided Carranza Trucking with fuel transaction cards, which Carranza Trucking used to purchase fuel to perform the contracts. However, the fuel transaction cards were used to purchase more fuel than the contracts allotted.

After the Postal Service began offsetting part of the monthly contract payments to recover the cost of the excess fuel, Carranza Trucking refused to continue performance. The Postal Service terminated the two contracts for default and continued to seek payment for the excess fuel costs.

Carranza Trucking challenges the terminations for default and seeks breach damages and payments otherwise due under the contracts. At the parties’ joint request, both entitlement and quantum are being decided on a written record in lieu of an oral hearing.

We deny the challenges to the terminations for default. We allow recovery, in part, by the Postal Service for excess fuel. We deny Carranza Trucking’s breach claims. The Postal Service is entitled to recover $81,389.90.

FINDINGS OF FACT

  1. The Postal Service and Carranza Trucking were parties to Highway Contract Route (“HCR”) Nos. 33547 and 33749 (together “the Contracts”) for truck transportation of mail in Florida (Stipulations, ¶ 4; AF 1 at 26-29; AF 3 at 203).1 HCR No. 33749 expired on March 31, 2011 (AF 2 at 145).
  2. The Contracts included the Fuel Management Program (“FMP”) in effect at the time of contract award. Under the FMP, the Postal Service would pay for the fuel used by Carranza Trucking up to an agreed upon number of gallons each year. (Stipulations, ¶ 6; see also 4th Supp. 14 at 747, 791-815; AF 1 at 49-75, 107; AF 3 at 252, 299-322). HCR No. 33547 incorporated by reference the 2006 FMP (4th Supp. 14 at 747). When the parties renewed HCR No. 33547, they substituted the 2009 FMP (AF 3 at 299-322). HCR No. 33749 incorporated the 2007 FMP (AF 1 at 49-75).
  3. Under the FMPs, the Postal Service issued Carranza Trucking fuel transaction cards to purchase fuel at gas stations for use in performing the contracts. The gas station location, purchase price, and quantity of fuel for each purchase were tracked by the transaction card company and posted to a website, available for review by both parties. The Postal Service directly paid the monthly transaction card invoices. (4th Supp. 14 at 793; AF 1 at 51; AF 3 at 302). Carranza Trucking’s vehicles used only diesel fuel and performed the contracts solely within Florida (Carranza Aff. ¶¶ 10-15; Stipulations, ¶ 11; AF 1 at 26-29; AF 3 at 214-16).
  4. The FMPs allocated the risk of unauthorized use of the transaction cards as follows:            
                The HCR supplier [Carranza Trucking] will be liable for the unauthorized use of the fuel transaction card, except it
                shall not be liable for unauthorized use that occurs after the Designated Card Provider has been properly notified. In
                order to protect the HCR supplier from unauthorized transactions, it is suggested that the HCR supplier review the
                transaction details on the Designated Card Provider’s website. The HCR supplier must report the unauthorized use of
                the fuel transaction card . . . and/or the loss or theft immediately by telephoning the Designated Card Provider . . . .
                Should an unauthorized use of the card(s) occur, the Postal Service, at its sole discretion, may choose to immediately
                cancel the card(s). . . . Neither the Postal Service nor the Designated Card Provider is responsible for controlling an
                authorized user’s use of a card. The HCR supplier is responsible for all charges made to the card(s) issued by the
                Designated Card Provider. Unauthorized purchases may be deducted from the HCR supplier’s compensation.

    (AF 1 at 54-55; AF 3 at 305, bold emphasis in original, underlined emphasis added).
  5. The FMPs provided that if Carranza Trucking used less than the agreed upon amount of fuel, it was not entitled to retain the value of the unused fuel. However, if the parties entered into a pooling agreement (i.e., a combination of fuel allotted on two or more contracts held by the same contractor) the use of less than the agreed upon amount of fuel for one contract could be used to offset an overage on a different contract. (AF 1 at 55; AF 3 at 306, 313-16).
  6. The 2007 FMP provided that “[o]n a monthly basis the Contracting Officer should review all participants using the fuel transaction card to ensure responsible usage. . . .” (AF 1 at 55, emphasis added). The 2009 FMP provided that “[a]t the end of the contract year, the Contracting Officer should review the HCR supplier’s fuel usage. . . .” (AF 3 at 306, emphasis added). The 2007 FMP provided that “[s]uppliers purchasing gallons exceeding the allotted gallons needed for the prescribed time frame, may be contacted.” (AF 1 at 55, emphasis added). The 2009 FMP is silent on contacting the contractor (AF 3 at 299-322). The 2007 FMP also provided that “[s]hould an unauthorized use of a card(s) occur, the Postal Service, at its sole discretion, may choose to immediately cancel the card(s).”2 (AF 1 at 54; AF 3 at 305, emphasis added). Additionally, the 2009 FMP required that “Contracting Officers must immediately refer all incidents of theft or unauthorized use to the USPS Office of Inspector General for investigation.” (AF 3 at 305, emphasis added).
  7. The 2007 and 2009 FMPs allowed the contracting officer to take lump sum deductions from contract payments to recover the value of fuel purchased in excess of the gallon allotments in the Contracts (AF 1 at 55; AF 3 at 306; 4th Supp. 14 at 797).
  8. From July 1, 2008, through June 30, 2009, the Contracts allotted Carranza Trucking 50,827.31 gallons of fuel. During that period, Carranza Trucking’s fuel transaction cards were used to purchase 52,599.85 gallons of fuel. The value of that 1,772.54 gallon overage was $4,668.56. (4th Supp. 1 at 1, 4; 5th Supp. 1 (Harris Decl., ¶ 13)).
  9. From July 1, 2009, through June 30, 2010, the Contracts allotted Carranza Trucking 51,133.32 gallons of fuel. During that period, Carranza Trucking’s fuel transaction cards were used to purchase 122,776.68 gallons of fuel. The value of that net 71,643.36 gallon overage was $210,340.06.3 The first month showing a substantial overage in fuel purchases was December 2009, under HCR No. 33749 (2,574.42 gallons allowed; 7,786.42 gallons purchased). (4th Supp. 1 at 1, 3; 5th Supp. 1 (Harris Decl., ¶ 14)).
  10. From July 1, 2010, through August 31, 2010, the Contracts allotted Carranza Trucking 4,886.66 gallons of fuel. During that period, Carranza Trucking’s transaction cards were used to purchase 24,440.88 gallons of fuel. (4th Supp. 1 at 1, 2; 5th Supp. 1 (Harris Decl., ¶ 15)). This amounts to an overage of 19,554.22 gallons.
  11. The contracting officer apparently utilized fuel purchase data contained in the Appeal File to determine the sizes of the overages (4th Supp. 2 at 9-97; 5th Supp. 1 (Harris Decl., ¶ 16)). Those data, however, contain conflicting values for the number of gallons purchased between July 1, 2010 and August 31, 2010 (24,628.36 gallon overage compared to 19,554.22 gallon overage) (compare 4th Supp. 1 at 1, with 4th Supp. 1 at 2).4 Although the contracting officer utilized the smaller of those overage figures, he based the monetary value of the overage ($70,540.62) on the larger figure. We proportionately have reduced the value of the overage to $56,007.25 (i.e., $70,540.62 x (19,554.22 gallons ÷ 24,628.36 gallons)).5
  12. The total value of the three overages relevant to these appeals is $271,015.87 (i.e., $4,668.56 (July 2008 through June 2009) + $210,340.06 (July 2009 through June 2010) + $56,007.25 (July 2010 through August 2010)). This amount is $14,533.37 less than the $285,549.24 claimed by the Postal Service (see Finding 19).
  13. In March or April of 2010, the contracting officer first became aware of excessive fuel purchases (Stipulations, ¶ 23; 5th Supp. 1 (Harris Decl. ¶ 12)). The record does not include an explanation of how the contracting officer learned of the overage, or of what actions, if any, the contracting officer took once he learned of the overage.
  14. The overages for HCR No. 33749 based on 2,429 gallons per month are as follows:
      July 2009                -42.52 gallons (under allotment
      August 2009           152.54 gallons
      September 2009      212.62 gallons
      October 2009         -52.86 gallons (under allotment
      November 2009       548.79 gallons
      December 2009       5,212.00 gallons
      January 2010          4,497.49 gallons
      February 2010        7,904.50 gallons
      March 2010             19,741.93 gallons
      April 2010                8,445.81 gallons
      May 2010                17,545.06 gallons
      June 2010                8,417.95 gallons
      July 2010                 18,516.70 gallons
      August 2010            6,111.66 gallons
    (4th Supp. 1 at 2-3).6 Although the contract was performed solely within Florida and Carranza Trucking’s vehicles used diesel fuel, some transactions occured in Louisiana, included non-diesel fuel purchases, and included transactions exceeding the capacity of the largest of the vehicles’ fuel tanks (Carranza Decl. ¶¶ 10-15; 4th Supp. 2 at 9-97; AF 6 at 394).
  15. Although the contracting officer learned of the overages in March or April of 2010, he did not notify Carranza Trucking until an August 19, 2010 e-mail, which stated “I have recently become aware of some very significant Carranza Trucking fuel overages. Please review the attached summaries; at this point I intend to remove Carranza Trucking from the fuel transaction card program and issue a final decision deducting over payments.” The summaries attached to the e-mail show a $285,549.24 fuel overage. (Stipulations, ¶ 9; AF 4 at 331-32). The record is silent regarding why the Postal Service waited to inform Carranza Trucking about the overages or cancel the fuel cards. Although the contracting officer informed Carranza Trucking on August 19 that he intended to remove it from the fuel transaction card program, he did not do so for HCR No. 33749 until October 31, 2010 (Stipulations, ¶ 23). However, unauthorized fuel purchases occurred between August 20 and August 31, as some transactions were for non-diesel fuel and some exceeded the capacity of the largest of Carranza Trucking’s vehicles (see 4th Supp. 2 at 96-97). Respondent is not seeking to recover for any unauthorized purchases occurring after August 31, 2010.
  16. The fuel overage from May 1, 2010 through August 19, 2010 is worth $139,989.22, calculated as follows:
    May 2010: 17,545.06 gallons overused fuel x $2.9359/gallon = $51,510.54
    June 2010: 8,417.95 gallons overused fuel x $2.9359/gallon = $24,714.26
    July 2010: 18,516.70 gallons overused fuel x $2.8642/gallon = $53,035.53
    August 2010: 6,111.66 gallons overused fuel x $2.8642/gallon = $17,505.01
    August 1-19 = 61.29% of the month; $17,505.01 x 0.6129 = $10,728.81
    $51,510.54 + $24,714.26 + $53,035.53 + $10,728.81 = $139,989.22.
    (See Finding 14, nn. 3 and 4).
  17. Carranza Trucking did not have actual knowledge of the overage until August 19, 2010, when the contracting officer contacted it (AF 1 at 331).
  18. On August 27, 2010, Carranza Trucking’s president advised the Postal Service that he believed many, if not most, of the fuel transaction card purchases were fraudulent (AF 4 at 329). Shortly after August 19, 2010, Carranza Trucking’s president contacted the Postal Service Office of Inspector General (IG) and requested an investigation. The record is silent as to whether the contracting officer separately contacted the IG. The record does not include evidence regarding what, if anything, the IG found. (AF 4 at 329; 4th Supp. 10 at 319; 5th Supp. 1; Carranza Aff., ¶ 13).
  19. On September 14, 2010, the Postal Service’s contracting officer issued a final decision assessing Carranza Trucking with a 92,970.12 gallon overage worth $285,549.24 for the period between July 1, 2008 and August 31, 2010 (AF 5; Stipulations, ¶ 10; see also 4th Supp. 1 at 1-8).
  20. The final decision informed Carranza Trucking that the Postal Service intended to withhold $23,795.77 from each of the next twelve payments on HCR No. 33547 starting on October 20, 2010. The final decision stated that the Postal Service was relying on its common law right of setoff to withhold payments on HCR No. 33547, including the excess fuel charges incurred under HCR No. 33749. (AF 5; Stipulations, ¶ 10; see also 3rd Supp. 7 at 324). Though not cited by the contracting officer, the payment clause also allowed setoff (“[d]eductions may be made from payments otherwise due the supplier under this contract or any other contracts held by supplier, for any amounts for which the supplier is liable as damages or otherwise.”) (AF 3 at 246, ¶ 2.1.2f).
  21. From July 1, 2009 through June 30, 2010, HCR No. 33547 was under the allotment by 939.95 gallons (4th Supp. 1 at 3). Even though the parties had not executed a pooling agreement (Stipulations, ¶ 13), the Postal Service reduced its total claim from 93,910.07 gallons to 92,970.12 gallons (i.e., 93,910.07 gallons – 939.95 gallons = 92,970.12 gallons) (4th Supp. 1 at 1, 3).
  22. On October 5, 2010, Carranza Trucking submitted a notice of appeal challenging the Postal Service’s $285,549.24 claim (AF 7). The Board docketed this appeal as PSBCA No. 6354.
  23. Before actually offsetting any payments, the Postal Service modified the offset schedule (see Finding 20) to withhold $6,489.75 instead from each of the forty-four monthly payments remaining in HCR No. 33547 (Stipulations, ¶ 16; 1st Supp. 1 at 4-6). The Postal Service withheld $6,489.75 from the November 2010 payment due Carranza Trucking (5th Supp. 1 (Harris Decl. ¶ 25)).
  24. In response, by telephone message and e-mail on November 30, 2010, Carranza Trucking informed the contracting officer that because of the $6,489.75 offset “today is my last day of operation.” (1st Supp. 2 at 8-9; Stipulations, ¶¶ 17-18). The contracting officer replied: “[t]hank you for the notification; the route will be terminated for default based upon the intended abandonment.” (1st Supp. 2 at 8). Carranza Trucking stopped providing service on HCR No. 33547 on December 1, 2010 (Stipulations, ¶ 19).
  25. The Contracts’ Termination for Default clause provided that “[t]he Postal Service may terminate this contract, or any part hereof for default by the supplier, or if the supplier fails to provide the Postal Service, upon request with adequate assurances of future performance. . . .” (AF 1 at 90; AF 3 at 254). The Contracts also provided that “[t]he supplier’s failure to perform service according to the terms of the contract” is an “event of default.” (Stipulations, ¶ 27; AF 3 at 260-61).
  26. The Contracts’ Claims and Disputes clause required that “[t]he supplier must proceed diligently with performance of this contract, pending final resolution of any request for relief, claim, appeal, or action arising under the contract, and comply with any decision of the contracting officer.” (AF 1 at 91 (incorporating the clause by reference); AF 3 at 259 (incorporating the clause by reference)).
  27. On December 8, 2010, the contracting officer issued a final decision terminating HCR No. 33547 for default based on Carranza Trucking’s failure to perform (1st Supp. 4; Stipulations, ¶ 20). Carranza Trucking timely appealed the termination for default, which the Board docketed as PSBCA No. 6367.
  28. Carranza Trucking did not perform service on HCR No. 33749 after February 1, 2011 (Stipulations, ¶ 21; 1st Supp. 9 at 21). On February 4, 2011, the contracting officer issued a final decision terminating HCR No. 33749 for default (Stipulations, ¶ 22; 1st Supp. 9 at 21). Carranza Trucking timely appealed the termination for default, which the Board docketed as PSBCA No. 6373.
  29. The Postal Service withheld $43,147 from the January 2011 payment otherwise due Carranza Trucking (5th Supp. 1 (Harris Decl. ¶ 29)).
  30. In August 2011, Carranza Trucking filed two claims. First, it sought $678,285.73 for breach damages seeking the contract balance for the remaining forty-four months of HCR No. 33547. On September 8, 2011, the contracting officer denied this claim. (2nd Supp. 2 and 4). The Board docketed the appeal of this final decision as PSBCA No. 6421.
  31. Carranza Trucking’s second claim sought $45,402.84 under contract HCR No. 33749 for work it performed in January 2011 for which it was not paid. This claim identifies the following elements: $44,581.66 for Earned Income, $261.18 for Late Slips, and $500.00 for Extra Trips. (2nd Supp. 1 at 1).
  32. In a September 8, 2011 final decision, the contracting officer denied this claim, reasoning that the Postal Service was entitled to offsets against the $285,549.24 owed by Carranza Trucking (2nd Supp. 3). The Board docketed the appeal of this final decision as PSBCA No. 6422.

DECISION

Postal Service’s Fuel Claim
The Postal Service has the burden of proving that it is entitled to compensation for its payments of Carranza Trucking’s fuel transaction card charges that exceeded the contract allotments. See, e.g., M. L. Energia, Inc., ASBCA No. 55947, 12-2 BCA ¶ 35,110 (government has the burden of proof with respect to its monetary claim). The Postal Service has shown that 92,970.12 gallons of fuel in excess of the allotted quantity were charged to Carranza Trucking’s fuel transaction cards, for which it seeks $285,549.24 (Findings 8-12). However, we conclude that the value of the excess fuel was $271,015.87 (Finding 12). Under the terms of the Contracts (see Finding 4), Carranza Trucking is responsible for the excess charges made to its cards. Thus, the Postal Service has met its initial burden for recovery of $271,015.87.

Carranza Trucking however, argues that it is not liable for any of this overage because: (1) the FMP lacks adequate safeguards that would have prevented the loss, (2) the contracting officer did not monitor its fuel usage, (3) the IG did not investigate the overage, (4) the Postal Service improperly pooled the number of gallons, and (5) the Postal Service breached a duty to notify Carranza Trucking once it had actual knowledge of the overages.7

Carranza Trucking first argues that the program lacked safeguards. It suggests that requiring identification from drivers each time they used a fuel transaction card, requiring that only authorized vehicles were fueled, and capping the frequency of fuel transaction card use would have protected it from unauthorized charges. However, when Carranza Trucking agreed to the program as part of its contracts, it would have been aware of these characteristics. Nevertheless, Carranza Trucking assumed the risks of performing under the terms of the 2007 and 2009 FMPs. See, e.g., S.T.C. Constr. Co., PSBCA No. 570, 1979 WL 2050 (March 22, 1979) (contractor must review the specifications and assumes the risk of performance); Raytheon Missile Sys. Co., ASBCA No. 57594, 13 BCA ¶ 35,264 (absent a specific contract provision, a contractor assumes the risk of performance under a firm fixed-price contract).

Carranza Trucking next argues that the Postal Service breached the Contracts by not monitoring fuel usage; however, both parties had the ability to monitor fuel usage. Carranza Trucking argues that the 2007 FMP’s statement that on “a monthly basis the contracting officer should review all participants using the fuel transaction card to ensure responsible usage” imposes a duty on the contracting officer to have done so.8 Carranza Trucking argues that the contracting officer breached this duty and thereby created a defense to collection of the overages. We disagree. The language cited by Carranza Trucking does not mandate action by the contracting officer or provide that Carranza Trucking was its intended beneficiary.

This language must also be read in the context of the clear allocation of the risk of fuel overages to Carranza Trucking, rather than the Postal Service. Such clear allocation of risk may not be defeated by non-mandatory language regarding review by the contracting officer. Accordingly, we reject this argument.

Carranza Trucking extends its argument that the Postal Service was required to monitor the fuel usage by alleging that the contract is unconscionable because Carranza Trucking had thirty days to report billing discrepancies to the fuel transaction card company and to the contracting officer. This argument misstates the Contracts’ language which required Carranza Trucking to report unauthorized use immediately (Finding 4). Carranza Trucking fails to allege or show, however, that the contracting officer refused to consider billing discrepancies notwithstanding the requirement of immediately reporting unauthorized use. Thus, we reject this argument because Carranza Trucking was not harmed by the reporting requirement. See, e.g., Nycal Offshore Dev. Corp. v. United States, 743 F.3d 837, 843 (Fed. Cir. 2014)(a party must show that its alleged loss was proximately caused by the breaching party).

Carranza Trucking’s third argument is that the IG should have opened an investigation and issued a report of its findings. Carranza Trucking fails to provide an explanation as to why its contract obligation for excess fuel use is excused by the IG’s failure to issue a report. See Yucca, a Joint Venture, GSBCA Nos. 6768, 7319, 85-3 BCA ¶ 18,511 at 92,951 (“the actions of the [IG] do not excuse [an] appellant’s failure to perform and therefore do not invalidate the default termination.”).

Fourth, Carranza Trucking challenges the Postal Service’s claim by alleging that the Postal Service improperly pooled the total fuel authorized in the two contracts. It argues that the lack of a signed pooling agreement precludes the Postal Service from collecting money from Carranza Trucking on HCR No. 33547. The Postal Service based its claim against Carranza Trucking on the common law right to setoff the overage due on HCR No. 33749 from future payments on HCR No. 33547, not on a pooling agreement. See United States v. Munsey Trust Co., 332 U.S. 234, 239 (1947); M.R. Kaplan (Penner Fin. Grp.), M.B.F. Corp., PSBCA Nos. 1303, et al., 87-3 BCA ¶ 19,969. The United States may exercise its right to setoff between separate contracts that the debtor may have with the Government. See Cecile Indus., Inc. v. Cheney, 995 F.2d 1052, 1054 (Fed. Cir. 1993)(citing Project Map, Inc. v. United States, 486 F.2d 1375, 1376 (Ct. Cl. 1973)). This right may be exercised even when the overpayment was pending before a board of contract appeals. See Project Map, 486 F.2d at 1376. Moreover, the payment clause in the Contracts allowed it (Finding 20). Whether or not the parties entered into a pooling agreement has no bearing on the dispute. Further, the Postal Service’s pooling of fuel benefitted Carranza Trucking by reducing the amount claimed by the Postal Service (Finding 21).

Fifth, Carranza Trucking argues that the Postal Service breached a duty owed to Carranza Trucking relieving it from liability once the contracting officer obtained actual knowledge and failed to act (Findings 13 and 15). Carranza Trucking frames this breached duty as a failure of the Postal Service to mitigate damages. However, as explained below, we view the implied duty of good faith and fair dealing as the more applicable legal duty. See Ling-Temco-Vought, Inc. v. United States, 475 F.2d 630, 638 (Ct. Cl. 1973)(“[T]he basic principle call[s] for fair treatment of both parties . . . . However the legal conclusion be framed, in terms of ‘waiver’ or ‘election’ or ‘estoppel’, that is the core concept.”). As explained below, we find merit in this defense, and reduce the Postal Service’s recovery accordingly.

“Every contract imposes upon each party a duty of good faith and fair dealing in its performance and enforcement.” Metcalf Constr. Co., Inc. v. United States, 742 F.3d 984, 990 (Fed. Cir. 2014)(citing Restatement (Second) of Contracts § 205 (1981)); Alabama v. North Carolina, 560 U.S. 330, 351 (2010). Failure to satisfy that duty constitutes a breach of contract. See Metcalf, 742 F.3d at 990. The duty to cooperate is an element of the duty of good faith and fair dealing. Id. at 990-91. Whether the government has breached the duty to cooperate is determined by the reasonableness of its actions under the circumstances. See Metric Constr. Co., Inc. v. United States, 81 Fed. Cl. 804, 818 (2008). The duty to cooperate extends to the assertion of contract claims and defenses. See All-Am. Poly Corp., GSBCA No. 7104, 84-3 BCA ¶ 17,682 (citing Restatement § 205 cmt. e). The duty also requires the government, in appropriate circumstances, to cooperate by taking affirmative action. See Neal & Co., Inc. v. United States, 36 Fed. Cl. 600, 631 (1996), aff’d., 121 F.3d 683 (Fed. Cir. 1997).

In the present case, the contracting officer became aware sometime in March or April 2010 of substantial overages, indicative of fraud or other serious contract problems, for which Carranza Trucking would be liable if allowed to continue to accumulate unabated (Finding 13). Notwithstanding this knowledge and for reasons not explained in the record before us, the contracting officer did not contact Carranza Trucking until August 19, 2010, when he notified it by e-mail about the overages (Finding 15). The record also does not show that the Postal Service took other actions specified by the Contracts, such as notifying the IG, cancelling the fuel transaction cards, or otherwise preventing additional accumulation of fuel overuse charges (Findings 14 and 15).

Under the facts in this case (i.e., the involvement of the contracting officer in monitoring fuel usage anticipated by the FMP, and the overly large fuel overages evident when he first became aware in the March-April 2010 period), by waiting until August 19, 2010 to contact Carranza Trucking about the apparent problem, the Postal Service’s behavior was unreasonable and breached its duty to cooperate. See All-Am. Poly Corp., GSBCA No. 7104, 84-3 BCA ¶ 17,682 at 88,189 (“deliberate inaction” can violate the duty of good faith and fair dealing); Samson J. Hypolite, PSBCA No. 5266, 06-2 BCA ¶ 33,337 (citing Peter Kiewit Sons' Co. v. United States, 151 F. Supp. 726, 731 (Ct. Cl. 1957)(negligent behavior can violate the duty); Selpa Constr. & Rental Equip. Corp., PSBCA Nos. 5039, et al., 11-1 BCA ¶ 34,635, aff’d., 464 Fed. Appx. 879 (Fed. Cir. 2012)(duty to cooperate can involve an affirmative obligation to act); T&G Aviation, Inc., ASBCA No. 40428, 00-2 BCA ¶ 31,147 at 153,846 (“[a] contractor is entitled to recover damages caused by the Government’s failure to cooperate in its performance, and the duty to cooperate includes the provision of necessary or essential information.”).9

As a remedy for this breach, we conclude that the Postal Service may not recover the overages that likely would not have occurred but for its failure to give prompt notice, or take other actions to prevent further overuse of the cards. The record shows only that the contracting officer actually knew of the overages in March or April 2010. We are unable to determine more precisely the date on which the contracting officer acquired (but failed to share) this critical information. Inasmuch as Carranza Trucking has the burden of proof with respect to this defense, we give the benefit of the doubt to the Postal Service and conclude that the contracting officer learned of the overages at the end of that period – April 30, 2010. Thus, we establish May 1, 2010, as the beginning of the period of “non-recovery” for the Postal Service.

Inasmuch as the contracting officer informed Carranza Trucking of the overages on August 19, 2010, the period of non-recovery extends at least to that date. This leaves in question the period from August 20 through August 31, 2010, which is the last day for which the Postal Service seeks recovery (see Finding 15). We conclude that given Carranza Trucking’s primary responsibility for overages under the FMP, Carranza Trucking again became liable for overages that occurred between August 20 and August 31, 2010.

Accordingly, we reduce the amount awarded to the Postal Service by $139,989.22 (Finding 16) to disallow its recovery between May 1 and August 19, 2010. The Postal Service’s affirmative recovery, therefore, is reduced from $285,549.24 to $81,389.90, calculated as follows.

            Reduction from $285,549.24 to $271,015.87 due to the contracting officer’s calculation errors (see Finding 12);
            Reduction from $271,015.87 to $131,026.65 due to the subtraction of $139,989.22 based on the Postal Service’s breach of its
            duty of cooperation (see Finding 16);
            Reduction from $131,026.65 to $124,536.90 due to credit for $6,489.75 offset by the Postal Service in November 2010 (see
            Finding 23);
            Reduction from $124,536.90 to $81,389.90 due to credit for $43,147 offset by the Postal Service in January 2011 (see Finding
            29).

Termination for Default
The Postal Service has the burden of proof in the termination for default appeals. See Lisbon Contractors, Inc. v. United States, 828 F.2d 759, 765 (Fed. Cir. 1987). The Postal Service properly terminated HCR No. 33547 when the contractor unequivocally repudiated the contract and refused to continue performance. See Incentive Transp. Servs., Inc., PSBCA No. 5412, 09-2 BCA ¶ 34,198 (repudiation occurs when the contractor manifests a positive, unequivocal, and unconditional intent not to perform). The Postal Service properly terminated HCR No. 33749 when Carranza Trucking completely stopped performing. (Findings 24 and 28). The Postal Service has met its prima facie burden for the default terminations. See Jean E. Smith, PSBCA No. 5360, 10-2 BCA ¶ 34,546.

The burden then shifts to Carranza Trucking to show excusable causes for its defaults, see Charli Selsa Schiver d/b/a NGX-Schiver, PSBCA No. 4545, 02-2 BCA ¶ 31,937, or show that the contracting officer abused his discretion, see Jesse A. Farmer, PSBCA No. 2702, 91-3 BCA ¶ 24,181. Carranza Trucking argues that its breaches should be excused because the Postal Service first breached the Contracts by withholding payment and by failing to provide the required level of due process.

When a contractor claims, as in this case, that its failure to perform is due to the Postal Service not making required payments, the burden is on the contractor to establish that the payments were (1) erroneously withheld, and (2) that the withholding of such payments was the primary and controlling cause of the default. See TGC Contracting Corp. v. United States, 736 F.2d 1512, 1515 (Fed. Cir. 1984); see also Todd’s Letter Carriers, PSBCA No. 4904, 05-2 BCA ¶ 33,121 (absent a justifiable reason for halting service, a contractor’s statements in its letters that it intended to halt performance were sufficient to warrant default termination), recon. denied, 2006 WL 6019558 (Mar. 16, 2006); Lawrence D. Bane, PSBCA Nos. 1440, 1491, 86-2 BCA ¶ 18,997 (contractor bears the burden of proving its anticipatory breach was excusable).

Although the Postal Service intended to offset more than we find it was due, it did not breach the Contracts by actually withholding the one payment it did (Finding 23). The Contracts specifically allowed the Postal Service to withhold payment to recover for fuel overuse (Finding 20). Additionally, as noted above, the Postal Service was allowed to offset from another contract. Further, while the contracts authorized the Postal Service to withhold a lump sum, it reasonably opted to spread out repayment over a longer period of time (see Findings 4 and 23). Carranza Trucking did not show that a $6,489.75 offset rendered it financially incapable of performing. See TGC Contracting, 736 F.2d at 1515. On these facts, Carranza Trucking has not presented a viable defense for its breaches.

Carranza Trucking also argues that its Constitutional right to due process under the Fifth Amendment was violated because it was not granted an opportunity to be heard and present evidence before the Postal Service withheld funds. Carranza Trucking’s due process claim relates to its contract with the Postal Service, and its dispute is essentially contractual in nature. A breach of contract does not support a substantive due process argument under the Constitution. See Khan v. Bland, 630 F.3d 519, 535-36 (7th Cir. 2010). As such, the contract dispute is subsumed within this Contract Disputes Act proceeding and does not require separate analysis. See B & B Trucking, Inc. v. U.S. Postal Serv., 406 F.3d 766, 768 (6th Cir. 2005)(en banc). Any procedural due process argument Carranza Trucking may be raising also is inapplicable where the alleged government violation relates to a contract. See B & B Trucking, 406 F.3d at 768; see also Evers v. Astrue, 536 F.3d 651, 658 (7th Cir. 2008)(source of procedural due process claim really is the contract with the government). Moreover, those due process rights were satisfied by this proceeding. See Frank Baiamonte, PSBCA Nos. 5297, 5324, 08-1 BCA ¶ 33,852; accord Cascade Pac. Int’l v. United States, 773 F.2d 287, 293 (Fed. Cir. 1985)(contractor entitled to notice of damages under Contract Disputes Act).

Carranza Trucking’s Claims
Carranza Trucking filed two damages claims. Carranza Trucking first claims that it is entitled to $678,285.73, the entire contract balance on HCR No. 33547 for the remaining forty-four months of performance. Because the Postal Service properly terminated the Contracts for default, Carranza Trucking is not entitled to breach damages.

Carranza Trucking’s second claim seeks entitlement for $45,402.84 for work done in January 2011. The Postal Service does not contest that Carranza Trucking provided trucking services in January 2011 on HCR No. 33749, and explains that it withheld $43,147 from payments due to Carranza Trucking for this work. The parties agree that Carranza Trucking earned at least $43,147 for work done in January 2011. Carranza Trucking has the burden of proving that it is entitled to the additional $2,255.88. See, e.g., Tromel Constr. Corp., PSBCA No. 6303, 13 BCA ¶ 35,346 (damages must be proved with sufficient certainty so that determination of the amount is more than mere speculation). Carranza Trucking has presented no evidence for this difference, and thus has not proved that it is entitled to the additional $2,255.88. Therefore, we deny this portion of the claim. Accordingly, we only grant $43,147 of Carranza Trucking’s second claim.

CONCLUSION

The Postal Service has proved that Carranza Trucking is liable for $81,389.90 for fuel overuse, after reduction for the amounts it previously offset. The Postal Service has also shown it properly terminated Carranza Trucking for default. Accordingly,

  1. PSBCA No. 6354 (Carranza Trucking’s appeal of the Postal Service’s $285,549.24 claim) is granted in part and denied in part. The Postal Service may collect $81,389.90.
  2. PSBCA No. 6367 (Carranza Trucking’s appeal of the Postal Service’s termination of HCR No. 33547 for default) is denied.
  3. PSBCA No. 6373 (Carranza Trucking’s appeal of the Postal Service’s termination of HCR No. 33749 for default) is denied.
  4. PSBCA No. 6421 (Carranza Trucking’s claim for $678,285.73) is denied.
  5. PSBCA No. 6422 (Carranza Trucking’s claim for $45,402.84) is granted in part, for $43,147, which has reduced the amount the Postal Service may collect. In summary, the Postal Service may collect $81,389.90 from Carranza Trucking.

 

Peter F. Pontzer
Administrative Judge
Board Member

I concur: 
William A. Campbell 
Administrative Judge
Chairman  

I concur: 
Gary E. Shapiro
Administrative Judge
Vice Chairman

 

1 References to the parties’ Joint Stipulations of Fact and Law are identified as (Stipulations). The exhibits submitted by the Postal Service include the Appeal File (AF), the Supplemental Appeal File (1st Supp.), Second Supplemental Appeal File (2nd Supp.), Third Supplemental Appeal File (3rd Supp.), Respondent’s Additional Evidence Volume 1 (4th Supp.), Respondent’s Additional Evidence Volume 2 (5th Supp.). Carranza Trucking submitted Appellant’s Supplemental Appeal File (App. Supp.).

2 The 2009 FMP deleted the words “choose to” from the quote. In the context of this litigation, we do not consider this change to be material.

3 Contract 33749 showed an overage of 72,583.31 gallons, while 939.95 fewer gallons than allotted were charged under Contract 33547. An average of $2.94 per gallon was used to calculate the overage ($210,340.06 ÷ 71,643.36 = $2.9359).

4 The record contains 97 pages of fuel transaction data (4th Supp. 1 at 1-97). Page 1 shows an overage of 19,554.22 gallons worth $70,540.62. Page 2 shows an overage of 24,628.36 gallons also worth $70,540.62. The contracting officer’s declaration states that the overage during this period was 19,554.22 gallons (i.e., he stated that “Appellant was allowed 4,886.66 gallons of fuel . . . . Appellant’s [transaction] cards purchased 24,440.88 gallons . . . .” which leads us to the 19,554.22 gallons)(5th Supp. 1 (Harris Decl., ¶ 15)). We resolve the conflict in the data by adopting the contracting officer’s explanation which results in our using the 19,554.22 gallons.

5 The proportional adjustment leads to $2.8642 per gallon ($56,007.25 ÷ 19,554.22 gallons = $2.8642 per gallon). Our review of the raw data for July 1 to August 31, 2010 shows that a $2.8642 price per gallon is roughly consistent with the price per gallon that was actually charged. The range for this time period is $2.75 to $3.05 per gallon (4th Supp. 1 at 91-97). The alternative, using 19,554.22 gallons at a cost of $70,540.62 would lead to a price per gallon of $3.6074, is inconsistent with the price per gallon actually charged.

6 The record does not indicate why the Postal Service used 2,429 gallons per month in calculating the fuel usage instead of 2,427 gallons per month allotted to HCR No. 33749. We view the two gallon difference as having minimal effect on the outcome of this litigation. The record also includes minor monthly variations to the allowed gallons based on things such as route changes.

7 Carranza Trucking also raises four additional arguments without identifying supporting facts in the record, supporting legal precedent, or analysis explaining why they are persuasive. The arguments are: participation in the FMP was mandatory; required audits by the Postal Service were not completed; driver transaction reports appear to be criminal in nature; and the Postal Service’s reconciliation of fuel records is inaccurate. We have considered these arguments, but do not accept them. Carranza Trucking also argues that the Postal Service violated a duty to mitigate damages. Because we rule in Carranza Trucking’s favor that the Postal Service violated its duty to cooperate, and we reduce the Postal Service’s claim based on this failure, we do not separately address the mitigation argument.

8 Carranza Trucking also presents arguments concerning a 2006 FMP, which is not applicable to this case because of the timing of the overages (Findings 2, 10, and 11).

9 Accord Westfed Holdings, Inc. v. United States, 407 F.3d 1352, 1361 (Fed. Cir. 2005)(citing Northern Helex Co. v. United States, 197 Ct. Cl. 118, 455 F.2d 546, 551 (1972)(the government is not entitled to “run up damages, and then go suddenly to court.”)).