Appeal of
STEPHEN ZUCKER
PACKAGES SERVICES PLUS
Under Contract Nos. 038880-91-P-0403, 038880-92-X-0432, 038880-92-X-0468
PSBCA Nos. 3396-3398

APPEARANCE FOR APPELLANT:
Gordon Stewart, Esq.

APPEARANCE FOR RESPONDENT:
Mark E. Dennett, Esq.

OPINION OF THE BOARD ON MOTION FOR SUMMARY JUDGMENT

            Respondent, United States Postal Service, has filed a motion for summary judgment in these appeals in which Appellant, Stephen Zucker doing business as Packages Services Plus, has challenged the termination of three contracts for the operation of contract postal units in El Paso, Texas.

FINDINGS OF FACT

            For the purpose of deciding the motion for summary judgment, we make the following findings of fact.

            1.  Contract No. 038880-91-P-0403 was entered into between the parties on July 19, 1991.  The contract called for the operation of a contract postal unit (CPU) at 6990 Westwind, El Paso, Texas (Westwind CPU), at an annual rate of $12,000.  (Appeal File Tab (AF) 1).

            2.  Contract No. 038880-92-X-0432 was entered into between the parties on August 11, 1992, and called for the operation of a CPU at 1906 Lee Trevino, El Paso, Texas (Trevino CPU) at a yearly rate of $100.  (AF-2).

            3.  Contract No. 038880-92-X-0468 was entered into between the parties on September 30, 1992, and called for the operation of a CPU at 255 Shadow Mountain, El Paso, Texas (Shadow Mountain CPU) at a yearly rate of $100.  (AF-3).

            4.  Each of the contracts contained the following relevant provisions:

            "C.1    CONTRACT DURATION AND TERMINATION

a.  Duration.  The contract will be for an indefinite term, subject to the rights of termination specified in b below.

b.  Termination.  This contract may be terminated by either the Postal Service contracting officer or the contractor upon 60 days' written notice.  The contracting officer may terminate the contract upon one day's written notice if necessary to protect the Postal Service's interest.

***

CONTRACTING OFFICER'S REPRESENTATIVE

The contracting officer will appoint a contracting officer's representative (COR), responsible for the day-to-day administration of the contract, to serve as the Postal Service point of contact with the contractor on all routine matters....

INSPECTION OF WORK

The contracting officer's representative (COR) will periodically inspect the contractor's performance to make sure that it is in accordance with the contract.  The COR will immediately notify the contracting officer if the work is unsatisfactory.  If the contractor continues to perform unsatisfactorily, the contracting officer will notify the contractor in writing to correct the deficiencies; if uncorrected, the Postal Service may terminate the contract." (AF-1, 2, 3)

The contracts also contained the standard Claims and Disputes Clause (Id.)

            5.  Paragraph 6.9.1 c.1 of the USPS Procurement Manual,[1] effective at the time of award of these contracts, provided,

"Contracts may be terminated -- whether for default, convenience, or upon notice -- only when such action is in the interest of the Postal Service."  (USPS Publication 41).

            6.  The Contracting Officers who awarded the contracts issued letters appointing Fernando Castillo the contracting officer's representative (COR) for the Westwind contract, Mike Coffey COR for the Trevino contract, and Rudy Madrid COR for the Shadow Mountain contract (AF 5-7).

            7.  By letter dated October 28, 1992, Appellant wrote to Veronica Flores, Director of Finance in El Paso, formally indicating his interest in entering into an emergency six-month contract to take over the operation of a CPU on North Stanton Street in El Paso, known as the "Kern" station.  Appellant proposed to operate the station for a monthly fee of $3,500.  By letter of the same date to the Support Services office in Tucson, Arizona, Ms. Flores recommended accepting Appellant's proposal and awarding an emergency contract to him, describing Mr. Zucker as "a very desirable contractor to work with."  (Declaration of Stephen Zucker, Exhibits B & C).

            8.  By letter dated October 30, 1992, a contract administrator from the Support Services office wrote to Appellant stating that he would have to obtain a bond before the Kern contract could be awarded to him.  Although the record contains what appears to be a completed bond, there is no evidence the Kern contract was actually awarded.  (Id., Exhibit D & E).

            9.  On November 27, 1992, Postal Inspector Sheila Ryan issued an investigative memorandum in which she alleged that:[2]

a.  In April 1992 she received a complaint from a postal customer that proper postage had not been affixed to packages mailed at CPUs in El Paso.[3]  As a result, she began a testing procedure to determine the validity of the complaints.

b.  In June and July 1992 she mailed three packages at the Westwind CPU operated by Appellant.  In two of the instances, the amount of postage affixed to the package was less than the amount she was charged for mailing.  In the third instance, the amounts corresponded.

c.  In July 1992 she purchased a money order and had another Inspection Service employee give it to Appellant's manager, reporting it as having been found in a parking lot.  On September 10, 1992, the money order was deposited with the Westwind cash deposits and not returned to the Postal Service for disposition.

d.  In November 1992 the Westwind station was audited and found to be approximately $2,000 short.

e.  In November 1992, a cashier at the Westwind station and Appellant's manager told her that they had overcharged customers at the direction of Appellant, Stephen Zucker.

Prior to issuing the investigative memorandum, Inspector Ryan discussed her findings with Veronica Flores.  (Declaration of Sheila Ryan; Declaration of Veronica Flores; AF 9).

            10.  By letter dated November 19, 1992, Ms. Flores informed Mr. Zucker that because of an Inspection Service investigation, it was necessary to close the CPUs and cancel the contracts "in order to protect the interests of the Postal Service."  Further, she stated that the emergency Kern "contract request" had been cancelled.  The next day, Ms. Flores cancelled the contracts and removed all Postal Service property from the three CPU sites.  (AF 9; Declaration of Veronica Flores; Declaration of Stephen Zucker).

            11.  Ms. Flores did not have the authority to take the actions she did with respect to cancelling the contracts.  Before cancellation of the contracts Appellant had not been advised that its performance was unsatisfactory.  (AF 9; Declaration of Stephen Zucker).

            12.  By letter dated December 2, 1992, Ms. Flores advised the Contracting Officer, whose office was in Dallas, that she (Ms. Flores) had cancelled the three contracts effective November 19, 1992.  Ms. Flores reported that due to some customer complaints involving overcharges, the Inspection Service conducted an investigation and concluded that the complaints were valid.  Therefore, Ms. Flores reported, based on the strong recommendation of the Inspection Service, she had given one day's notice to the contractor and "proceeded to close him out."  Ms. Flores further stated that she would forward all the pertinent documents and asked that the cancellation be processed so that Appellant would receive no more payments under the contracts.  (AF 10).  This was the first time the Contracting Officer had been informed of Ms. Flores' actions.[4]

            13.  By letters dated December 18, 1992, the Contracting Officer provided "official notification" to Appellant that all three contracts would be terminated as of February 7, 1993, in accordance with the "Contract Duration and Termination" clause of the contracts.  The Contracting Officer intended to give Appellant the sixty-day notice required by that clause, but, through an administrative error, the time period stated in the letters did not allow the full sixty days.  (AF 13-15; Declaration of Saundra J. Smith).

            14.  In a later telephone conversation, the Contracting Officer told Appellant that she had nothing to do with the decision to terminate the contracts and that the decision had been made entirely by personnel in El Paso (Appellant's response to the summary judgment motion; Respondent's reply to Appellant's response).[5]

            15.  By letter dated January 13, 1993, Appellant filed an appeal of the three contract cancellations as well as cancellation of the Kern station "emergency contract request."

            16.  The three termination letters from the Contracting Officer were actually received by Appellant on December 24, 1992.  Appellant has been paid under the three terminated contracts through February 7, 1993.  (AF 13-15; Declaration of Cheryl Calhoun).

DECISION

            A motion for summary judgment may be granted only if no genuine issues of material fact exist and the moving party is entitled to judgment as a matter of law.  Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Mingus Constructors, Inc. v. United States, 812 F.2d 1387, 1390 (Fed. Cir. 1987); Rood Trucking Co., Inc., PSBCA Nos. 3121, 3132, 93-2 BCA ¶ 25,564; On Time Postal Services, Inc., PSBCA No. 2528, 90-2 BCA ¶ 22,698.  For purposes of the motion, doubts concerning factual issues must be resolved in favor of the nonmoving party.   United States v. Diebold, 369 U.S. 654, 655 (1962); Vienna/Vienna, PSBCA Nos. 2505, 2816, 92-3 BCA ¶ 25,042.

            Respondent contends there are no genuine issues of material fact and that it is entitled to judgment as a matter of law on the issue of the validity of the terminations.  Respondent concedes that the purported terminations by Veronica Flores, who was not the Contracting Officer, were ineffective and improper.  However, Respondent argues that the later terminations by the Contracting Officer were effective, even though she did not give the full 60-day notice required by the contracts.  Respondent argues that Appellant may recover, but only the fees he would have received under the contracts for the balance of the 60-day notification period.

            Appellant argues that there are material facts genuinely at issue which preclude granting summary judgment.  Appellant also argues that either there was no effective termination of the contracts or there was a termination tainted by bad faith or an abuse of discretion and that Appellant is, therefore, not limited in his recovery to payment of the contract amount for 60 days after receipt of the termination notices.  Further, Appellant argues that even if the termination clause was properly invoked, he is entitled to recover damages for Respondent's breach of contract provisions such as those requiring periodic inspection of Appellant's operation by the COR.

            Having considered the record and the arguments of the parties we conclude that there are genuine issues of material fact with respect to the issue of the validity of the contract terminations.  Therefore, we deny Respondent's motion with respect to that issue.  With respect to any claim related to the Kern station, we conclude that as no contract was ever consummated, we lack jurisdiction to consider any such claim and we therefore dismiss those portions of the Complaint for lack of jurisdiction.  Similarly, we dismiss for lack of jurisdiction those portions of the Complaint which seek monetary damages related to the termination or operation of the three contracts, as the record does not show that any claims for such damages were ever submitted to the Contracting Officer for her consideration.  Such submittal is a necessary prerequisite to our jurisdiction under the Contract Disputes Act.  Mark L. Gabel, PSBCA No. 2694, 90-2 BCA ¶ 22,697 and cases cited therein.

            Appellant argues first that no effective termination occurred because the Contracting Officer did not make an independent determination that contract termination was in the best interests of the Postal Service but, instead, merely carried out the wishes of Ms. Flores (the El Paso Finance Director) and the Inspection Service.  Under this argument, Appellant contends it would be entitled to continuing payments under the contracts.

            Appellant argues further that the termination, even if effective, was tainted by bad faith or abuse of discretion on Respondent's part and that accordingly, Appellant's recovery should not be limited to contract payments for 60 days following the Contracting Officer's termination.  As evidence of bad faith, Appellant again points to the fact that the termination letters from the Contracting Officer were issued at the behest of Ms. Flores and the Inspection Service and argues that they were issued simply in an attempt to support what Ms. Flores had already accomplished improperly - i.e., the shutdown of the three CPUs - and were not the product of any independent evaluation by the Contracting Officer.

            As argued by Respondent, unlike the wording of the usual termination for convenience clause, there was nothing in the contract language that required the Contracting Officer to decide that termination was in the best interests of the Postal Service before exercising the Postal Service's right to terminate.  However, the language of the USPS Procurement Manual imposed a similar constraint by restricting the exercise of the right to terminate "on notice" to those instances in which such action was "in the interest of the Postal Service."

            Based on the record, there remain before us several intertwined questions of fact and law such as whether it was properly determined that the termination was in the interest of the Postal Service; whether the Contracting Officer made or was required to make an independent determination that termination was in the interest of the Postal Service before exercising the right to terminate; and the remedy available should the Board determine the terminations "on notice" were improper.  Accordingly, we conclude that summary judgment would not be appropriate as to the issue of the propriety of the terminations.

            As indicated above, those portions of Appellants' Complaint related to Appellant's monetary claims (including those related to the Kern station) are dismissed for lack of jurisdiction.  The motion for summary judgment is otherwise denied.

David I. Brochstein
Administrative Judge
Board Member

I concur:
James A. Cohen
Administrative Judge
Chairman

I concur:
James D. Finn, Jr.
Administrative Judge
Vice Chairman

[1]  The Procurement Manual, USPS Publication 41, is incorporated by reference into Title 39 of the Code of Federal Regulations, which applies to the Postal Service.  39 C.F.R. § 601.100.

[2]  The Board specifically makes no findings as to the truth of the allegations which follow.  We find only that the statements were made.

[3]  The record does not reflect whether the complaints were directed against the one CPU (Westwind) then operated by Appellant.

[4]  Appellant's response to the summary judgment motion alleges this to be the case and Respondent does not deny the allegation.  Further, the record contains no evidence of any earlier advice to the Contracting Officer.

[5]  Respondent states that it would contest this finding at a hearing but, for the purpose of deciding this motion accepts the allegation as true.