C3PO International, Ltd. v. DynCorp International LLC
Filing
16
Memorandum Opinion and Order as to 12 Motion to Dismiss filed by DynCorp International LLC The Court orders all claims asserted by plaintiff in the Complaint except (a) the claim that defendant failed to pay plaintiff's invoices for serv ices plaintiff rendered to defendant under the contracts before the contracts were terminated, and (b) the claim related to the failure of defendant to participate in the equitable adjustment process be, and are hereby, dismissed because of the failure of the complaint to allege facts from which the court can plausibly conclude plaintiff has stated a claim against defendant than (those mentioned above). (Ordered by Judge John McBryde on 2/24/2015) (ult)
IN THE UNITED STATES DISTRIC
NORTHERN DISTRICT OF TE
FORT WORTH DIVISION
C3PO INTERNATIONAL, LTD.,
s
I
FEB 2 4 2015
CLERK, U.S. DISTRICT COlRT
By _ _~----
§
!Jepor~,
§
Plaintiff,
FILED
COlffilT
§
§
vs.
§
NO. 4:14-CV-564-A
§
DYNCORP INTERNATIONAL LLC,
§
§
Defendant.
§
MEMORANDUM OPINION
and
ORDER
Now before the court is the motion of defendant, Dyncorp
International LLC, to dismiss the complaint of plaintiff, C3PO
International, Ltd., for failure to state a claim upon which
relief may be granted.
replied.
Plaintiff filed a response, and defendant
After having considered all the parties' filings, the
pleadings, and the applicable legal authorities, the court
concludes that the motion to dismiss should be granted in part
and denied in part.
I.
The Complaint
Plaintiff initiated this action by a complaint filed on
July 23, 2014.
On October 27, 2014, plaintiff filed its first
amended complaint ("Complaint"), the pleading to which the motion
to dismiss is directed.
The following is a summary of the
allegations under the heading "Background Facts":
Plaintiff operated a compound in Kabul Afghanistan referred
to as "Northgate."
Compl. 2,
~
5.
Defendant, a primary
contractor for the United States Department of Defense, issued on
April 15, 2013, a purchase order ("PO") for plaintiff to provide
facilities for defendant's personnel at North Gate, including
"fully furnished living quarters, office space, parking spaces,
medical examination rooms, logistical storage areas, arms storage
facilities, DFAC services (dining facilities), housekeeping and
laundry services, fitness rooms, and morale welfare and
recreation areas."
Id.
A second purchase order ("2nd PO") was
issued April 25, 2013, that added office space and a storage
facility to the PO and "define[d] the 'period of performance' as
May 3, 2013 through April 29, 2014."
Id.,
~
6.
The PO and 2nd PO each constituted a contract between
plaintiff and defendant that incorporated defendant's "Statement
of Work"
("SOW") and "Purchase Order Terms and Conditions"
("T&C").
"The contract was a fixed price contract in the total
amount of $11,909,724," which meant defendant was "obligated to
pay the entire amount of the PO on day #1 of performance."
at 3,
~
8.
Id.
In connection with the PO and 2nd PO, plaintiff
invested significant funds in obtaining, building, retrofitting,
2
and otherwise improving North Gate for defendant's use, and
entered into a number of subcontracts in reliance on the purchase
orders, including the lease of space, fuel stations, supplies,
and workforce.
On July 2, 2013, there was a blast at North Gate.
Defendant
moved some of its personnel to an alternative compound known as
the Barron Hotel in Kabul for their safety.
after the blast, North Gate was secured."
"Almost immediately
Id.,
~
9.
Certain
employees of the defendant were arrested for assisting the
Taliban in the blast.
Following the blast, defendant made requests and
recommendations to plaintiff for upgrades in plaintiff's security
at North Gate.
In turn, plaintiff invested more money into the
facility to perform the requested upgrades.
On August 30, 2013, defendant terminated the PO, informally
citing security reasons.
Plaintiff told defendant that an
"independent security assessment revealed that [the Barron Hotel]
was not any safer than North Gate .
"
Id. at 4,
~
12.
The
termination did not comply with the protocol under the SOW to
address safety concerns.
Plaintiff continued to discuss possible alternatives with
defendant, such as defendant moving to another of plaintiff's
locations.
In November 2013, plaintiff sent a letter "requesting
3
that
[defendant] honor its obligations and compensate [plaintiff]
for its expenditures
adjustment."
i.e. a request for an equitable
Id. at 5, ~ 15.
As the 2nd PO was still in effect, defendant continued to
use the complementary amenities plaintiff had provided under the
PO, such as the "cinema room, banquet room, parking spaces, and
storage containers." Id. at 6,
on January 15, 2014.
~
17.
The 2nd PO was terminated
By then, plaintiff had requested equitable
adjustment from defendant through a variety of methods.
Because of the terminations, plaintiff suffered a loss of
$2,631,272.00 from July 2013, through October 2013 or a loss of
$6,578,180 from July 2013 through April 2014, and laid off
approximately half of its work force.
* * * * *
Plaintiff alleged the following causes of action against
defendant:
(1) breach of contract,
(2) quantum meruit, and (3)
promissory estoppel.
The following bases were alleged for plaintiff's breach of
contract claims:
(1)
Defendant has failed to pay invoices submitted by
plaintiff to defendant for work done from July-October 2013 "and
the remainder due under the contracts."
Id. at 7,
~
22.
Apparently this allegation is intended to include plaintiff's
4
claim that defendant owes plaintiff the balance of the full
contract price, based on plaintiff's contention that the PO and
2nd PO were fixed-price contracts that obligated defendant to pay
plaintiff the full contract price when the PO and 2nd PO were
entered into.
(2)
Defendant "failed to comply with the security protocol
described hereinabove."
Id.,
~
23.
Apparently that claim has
reference to a contention by plaintiff that defendant failed to
follow the procedures outlined in sections 4 and 15 of the SOW,
as plaintiff had alleged in the last two sentences of paragraph
12 on page 4 of the Complaint.
{3)
Defendant failed to provide an equitable adjustment to
plaintiff after defendant terminated the contract for convenience
as paragraph 20 of the T&C contemplated.
Plaintiff pleaded quantum meruit and promissory estoppel
claims based on the facts that it (1)
"invest[ed] millions of
dollars into this project" and (2) provided goods and services
"in connection with [defendant's] requested security upgrades
between July and August 2013."
Id. at 7-8,
5
~~
26 & 27.
II.
Defendant's Motion
Defendant contends that the Complaint fails to state a claim
upon which relief may be granted because the allegations of the
Complaint, including the exhibits to the Complaint, show that
(1)
defendant properly terminated the contract for convenience as the
contract authorized,
(2) the regulation on which plaintiff relies
in support of its contention that the termination for convenience
was not properly accomplished does not apply to this contract
between private parties;
(3) plaintiff is not entitled to an
equitable adjustment because it did not request such an
adjustment within thirty days of termination of the contract,
(4)
the contract did not contemplate that the full contract price
would be paid at commencement of the contract, but, rather it
contemplated that defendant would pay for plaintiff's services as
plaintiff invoiced defendant from time-to-time for those
services, and (5) the existence of a valid contract precludes
plaintiff from recovering under quantum meruit or promissory
estoppel.
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III.
Analysis
A.
Standards Applicable to the Motion to Dismiss
Rule 8{a) {2) of the Federal Rules of Civil Procedure
provides, in a general way, the applicable standard of pleading.
It requires that a complaint contain "a short and plain statement
of the claim showing that the pleader is entitled to relief,"
Fed. R. Civ. P. B{a) {2),
"in order to give the defendant fair
notice of what the claim is and the grounds upon which it rests,"
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)
quotation marks and ellipsis omitted) .
(internal
Although a complaint need
not contain detailed factual allegations, the "showing"
contemplated by Rule 8 requires the plaintiff to do more than
simply allege legal conclusions or recite the elements of a cause
of action.
Id. at 555 & n.3.
Thus, while a court must accept
all of the factual allegations in the complaint as true, it need
not credit bare legal conclusions that are unsupported by any
factual underpinnings.
{2009)
See Ashcroft v. Iqbal, 556 U.S. 662, 679
{"While legal conclusions can provide the framework of a
complaint, they must be supported by factual allegations.")
Moreover, to survive a motion to dismiss for failure to
state a claim, the facts pleaded must allow the court to infer
that the plaintiff's right to relief is plausible.
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Id.
To
allege a plausible right to relief, the facts pleaded must
suggest liabilityi allegations that are merely consistent with
unlawful conduct are insufficient.
Twombly, 550 U.S. at 566-69.
"Determining whether a complaint states a plausible claim for
relief .
.
.
[is] a context-specific task that requires the
reviewing court to draw on its judicial experience and common
sense."
Iqbal, 556 U.S. at 679.
In a case such as this, where the plaintiff has submitted
exhibits to his Complaint, the exhibits are part of the Complaint
for all purposes.
See Fed. R. Civ. P. lO(c)
(stating that "an
exhibit to a pleading is part of the pleading for all purposes").
See also United States ex rel. Riley v. St. Luke's Episcopal
Hasp., 355 F.3d 370, 375 (5th Cir. 2004) (holding that "it is not
error to consider the exhibits to be part of the complaint for
purposes of a Rule 12(b) (6) motion").
B.
The Breach of Contract Claims
With the exceptions of (a) the failure to pay invoices for
services rendered before the contracts were terminated and (b)
the equitable adjustment features of plaintiff's breach of
contract claims, the court has concluded that dismissal is
appropriate as to all features of those claims.
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1.
The Termination for Convenience Clause is Not Governed
by the Federal Acquisition Regulations
Plaintiff acknowledged that defendant had the right to
terminate the PO and 2nd PO upon thirty days' notice under the
Termination for Convenience clause in the T&C.
However,
plaintiff alleged that such terminations were not effective in
this case because of defendant's failure to comply with federal
regulations, making specific reference to Chapter 48 of the Code
of Federal Regulations.
Compl. at 4, ,, 13-14.
Chapter 48 of the Code of Federal Regulations is known as
the Federal Acquisition Regulations System ("FAR").
It was
"established for the codification and publication of uniform
policies and procedures for acquisition by all executive
agencies."
48 C.F.R. 1.101.
The FAR "applies to all
acquisitions as defined in part 2 of the FAR, except where
expressly excluded."
48 C.F.R. 1.104.
Part 2 defines
acquisitions as "the acquiring by contract with the appropriated
funds of supplies or services (including construction) by and for
the use of the Federal Government through purchase or lease
." 48 C.F.R. 2.101.
This contract was not executed by the
government and, therefore, is not an "acquisition" under FAR
regulations.
Also, section 49.102 requires that, in terminating
a contract for convenience, the notice must state "{1)
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[t]hat the
contract is being terminated for the convenience of the
Government . .
.
"
48 C.F.R. 49.102.
A plain reading of this
provision makes it clear that it is intended to apply to
contracts with the government as a party.
Finally, in support of its proposition that the FAR applies
to this contract, plaintiff pointed to 48 C.F.R. 49.002.
Section
(a) (1) of that provision ·states "[t]his part applies to contracts
that provide for termination for the convenience of the
Government or for the default of the contract . . . "; therefore,
it does not apply in this instance.
48 C.F.R. 49.002(a) {1).
Section (b) of that provision applies only where the subcontract
was terminated because of a modification of the prime contract,
which also is not applicable to this contract.
Because the Termination for Convenience clause in the
contract is not governed by FAR regulations, the defendant did
not breach the contract by failing to comply with those
regulations.
Therefore, the Complaint fails to allege facts that
support plaintiff's claim that defendant breached the contract by
its termination for convenience.
2.
Breach of Security Protocol
Defendant contends in the motion that the provisions of the
SOW dealing with security concerns did not abrogate its right to
terminate for convenience, and that, therefore, there is no valid
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allegation in the Complaint that it breached the contract by
failing to utilize such provisions to address its safety
concerns.
Section 4 of the SOW required plaintiff to make
security upgrades requested by defendant, and section 15 involved
health and safety audits/inspections and safety equipment.
Neither of these provisions limits defendant's right to terminate
for convenience under the contract.
Therefore, insofar as
plaintiff claims that defendant breached the contract by
terminating the contract for convenience instead of utilizing
these provisions to address safety concerns, plaintiff fails to
state a claim upon which relief may be granted.
3.
The Full Contract Price Was Not Payable at Commencement
of the Contract
As defendant points out in the brief it filed in support of
its motion, Def.'s Mot & Br. at 9-11, and in the reply brief in
support of the motion, Reply Br. at 6-8, the contract documents
establish as a matter of law that the parties contemplated that
defendant's payment obligations to plaintiff would depend on
billings by plaintiff to defendant for services rendered.
Defendant correctly points out that there is no reasonable
reading of the contract documents that would support a conclusion
that defendant had an obligation to pay the full contract amounts
at commencement of the contracts.
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Therefore, to whatever extent
the Complaint seeks recovery for services rendered or things done
by plaintiff for defendant after the terminations for convenience
went into effect, the allegations of the Complaint do not allege
facts that would lead to the conclusion that such a claim is
plausible.
To whatever extent the breach of contract claim includes a
claim that defendant failed to pay invoices submitted to it by
plaintiff for work done prior to defendant's termination of the
contracts, the court hesitates to dismiss that aspect of the
Complaint because there is a specific allegation that plaintiff's
loss was $2,631,272 from July 2013 through October 2013.
Therefore, that limited claim is surviving the motion to dismiss.
4.
Claim for Equitable Adjustment
Defendant argued that it did not breach the contract by
failing to provide an equitable adjustment to plaintiff, because
such an adjustment was not requested within the mandatory thirtyday period following termination for convenience.
Defendant terminated the PO on August 30, 2013.
In November
2013, plaintiff sent a letter requesting an equitable adjustment.
The 2nd PO was terminated on January 15, 2014.
The contract
states that plaintiff "shall submit a claim for equitable
adjustment within thirty (30) days of receipt of the termination
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notice."
Compl. App. at 14,
~
20.
Those facts are established
by the Complaint.
Plaintiff contends that it alleged in the Complaint that
within the thirty-day period it tried to work out alternate
arrangements for the defendant, and that its communications with
defendant during that time period, while not using the words
"equitable adjustment," clearly were in the nature of a request
of plaintiff for an equitable adjustment; and, plaintiff argues
that its allegations could lead to a legal conclusion that the
ongoing communications beyond thirty days after termination were
part of a series of communications and attempts centered on an
equitable solution to the termination of the contracts.
The court is not persuaded that plaintiff's breach-ofcontract-claim allegations related to defendant's nonparticipation in the equitable adjustment process failed to state
a claim for breach of contract.
Therefore, the motion to dismiss
is being denied as to that aspect of plaintiff's breach of
contract claim.
C.
The Quantum Meruit and Promissory Estoppel Claims
Defendant argued that plaintiff's claims for quantum meruit
and promissory estoppel fail because of the existence of a valid
contract governing the dispute.
Plaintiff's claims are based
upon the fact that plaintiff (1) spent millions of dollars on the
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project, and (2) performed security upgrades requested by
defendant between July and August 2013.
"The requisites of promissory estoppel are:
(1) a promise,
(2) foreseeability of reliance thereon by the promisor, and (3)
substantial reliance by the promisee to his detriment."
v. Fischer, 660 S.W.2d 521, 524 (Tex. 1983).
English
"Under Texas law, a
contract comprising the disputed promise precludes recovery under
promissory estoppel."
Jhaver v. Zapata Off-Shore Co., 903 F.2d
381, 385 (5th Cir. 1990).
"Quantum meruit is an equitable remedy that 'is based upon
the promise implied by law to pay for beneficial services
rendered and knowingly accepted.'" In re Kellogg Brown & Root,
Inc., 166
s. W. 3d 732, 740 (Tex. 2005) (citation omitted) .
Generally, one "cannot recover under quantum meruit when there is
a valid contract covering the services or materials furnished."
Id.
"To recover under the doctrine of quantum meruit, a
plaintiff must establish that: 1) valuable services and/or
materials were furnished, 2) to the party sought to be charged,
3) which were accepted by the party sought to be charged, and 4)
under such circumstances as reasonably notified the recipient
that the plaintiff, in performing, expected to be paid by the
recipient."
Heldenfels Bros., Inc. v. City of Corpus Christi,
832 S.W.2d 39, 41 (Tex. 1992).
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Plaintiff's claims based on the money it invested in order
to provide supplies and services to defendant under the contract
are governed by the equitable adjustment provision of the
contract.
Furthermore, section 4 of the SOW required plaintiff
to make any security upgrades required by defendant based upon
current situations or threat levels.
Because specific provisions
of the contract govern each of plaintiff's complaints in
promissory estoppel and quantum meruit, plaintiff has failed to
state a claim upon which relief may be granted as to those
claims.
D.
Conclusion
As indicated by the foregoing discussions, the court has
concluded that the Complaint fails to state any claim upon which
relief may be granted except as to {a) the claim that defendant
has failed to pay plaintiff for invoices plaintiff submitted to
defendant for services plaintiff rendered before the contracts
terminated and (b) the claim that defendant failed to comply with
its obligation to participate in an equitable adjustment process
as contemplated by paragraph 20 of the T&C, which provides in
pertinent part as follows:
Seller shall submit a claim for equitable adjustment
within thirty {30) days of receipt of the termination
notice.
If the termination involves only services,
Buyer shall be obligated to pay only for services
performed before the termination date, plus reasonable
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administrative costs to prepare the claim. Seller
shall provide Buyer any supporting information
necessary to document the reasonableness of Seller's
claim.
Mot., App. at 14, , 20.
The court has not meant in this memorandum opinion to
suggest that plaintiff has a viable claim for failure by
defendant to participate in an equitable adjustment process, only
that the court is not comfortable at this time in holding that
plaintiff has failed to allege sufficient facts to allow the
plaintiff to go forward on such a theory.
The thought occurs to the court that there may be a question
as to what kind of relief should be given plaintiff if the court
ultimately concludes that defendant wrongfully failed to
participate in the equitable adjustment process.
Perhaps an
order obligating defendant to participate in such a process at
this time would be appropriate.
The court will look forward to
hearing further from the parties on that subject as the case goes
forward.
v.
Order
For the reasons stated in the foregoing memorandum opinion,
The court ORDERS that all claims asserted by plaintiff in
the Complaint except (a) the claim that defendant failed to pay
16
plaintiff's invoices for services plaintiff rendered to defendant
under the contracts before the contracts terminated, and (b) the
claim related to the failure of defendant to participate in the
equitable adjustment process be, and are hereby, dismissed
because of the failure of the Complaint to allege facts from
which the court can plausibly conclude that plaintiff has stated
a claim against defendant for anything other than possibly (a}
the claim related to the alleged failure of defendant to pay
plaintiff for services rendered by plaintiff before the contracts
terminated, and (b) the claim pertaining to defendant's alleged
failure to engage in the equitable
SIGNED February 24, 2015.
District
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