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Yang Enterprises, Inc. v. Space Coast Launch Services, LLC

United States District Court, M.D. Florida, Orlando Division

November 17, 2017

YANG ENTERPRISES, INC., Plaintiff,
v.
SPACE COAST LAUNCH SERVICES, LLC, Defendant.

          ORDER

          ROY B. DALTON JR, United States District Judge

         This matter is before the Court on the following matters:

         (1) Defendant's Motion for Summary Judgment (Doc. 49);

         (2) Plaintiff, Yang Enterprises, Inc.'s Response to Defendant's Motion for Summary Judgment and Incorporated Memorandum of Law (Doc. 56);

         (3) Defendant's Reply to Plaintiff's Response to Defendant's Motion for Summary Judgment and Incorporated Memorandum of Law (Doc. 61);

         (4) Plaintiff, Yang Enterprises, Inc.'s Motion for Summary Judgment on Interpretation of Contract(s) and Incorporated Memorandum of Law (Doc. 51);

         (5) Defendant's Response to Plaintiff's Motion for Summary Judgment on Interpretation of Contract(s) and Incorporated Memorandum of Law (Doc. 57);

         (6) Plaintiff, Yang Enterprises, Inc.'s Reply to Defendant's Response to Plaintiff's Motion for Summary Judgment on Interpretation of Contract (Doc. 60);

         (7) Amended Joint Stipulation of Agreed Material Facts (Doc. 59);

         (8) Defendant's Supplemental Briefing on Lost Profits and Response to Question Posed by Court During Oral Argument (Doc. 72); and

         (9) Plaintiff, Yang Enterprises, Inc.'s Reply to Defendant's Supplemental Briefing on Lost Profits and Response to Question Posed by Court During Oral Arguments (Doc. 73).

         I. Introduction

         In this diversity action brought by subcontractor Yang Enterprises, Inc. (“Yang”) against prime contractor Space Coast Launch Services, LLC (“SCLS”), the parties dispute the meaning and effect of the terms of Subcontract Number 05-C-0008-02 (“Subcontract”), [1] and whether SCLS should be held liable for breach of contract (“Count I”) and the implied duty of good faith and fair dealing (“Count II”).[2] (See Doc. 11; Doc. 59, ¶¶1, 2, 55-57; Doc. 70, pp. 5, 18.) Seeking pre-trial resolution of discrete issues-particularly the meaning of Part I, Paragraph 1(d) (“Term 1(d)”) and Part II, Paragraph 16(c) (“Term 16(c)”) of the Subcontract-the parties filed and briefed cross- motions for summary judgment.[3] (Docs. 49, 51, 56, 57, 59, 60, 61.) After conducting a hearing on such motions (“Hearing”), the Court directed the parties to supplement their briefing. (See Doc. 70, pp. 38, 45-46.) With the supplemental briefing complete (see Docs. 72, 73), the matter is now ripe for adjudication.

         II. Legal Standards

         A. Summary Judgment

         Under the Federal Rules of Civil Procedure, “[a] party may move for summary judgment, identifying each claim or defense-or the part of each claim or defense-on which summary judgment is sought.” Fed.R.Civ.P. 56(a). The movant has the initial burden of establishing that “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Id.; Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). To meet this burden, a movant must: (1) cite “to particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations . . ., admissions, interrogatory answers, or other materials; or” (2) show “that the materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence” of a genuine dispute. Fed. R. Civ P. 56(c)(1).

         If a movant meets its initial burden, then the Court must enter summary judgment unless the non-movant shows that a “genuine” issue of material fact remains for trial. See Scott v. Harris, 550 U.S. 372, 380 (2007). An issue of fact is “genuine” if the record taken as a whole could lead a rational trier of fact to find for the nonmoving party. See Hickson Corp. v. N. Crossarm Co., 357 F.3d 1256, 1260 (11th Cir. 2004). “An issue is not ‘genuine' if it is unsupported by the evidence or is created by evidence that is ‘merely colorable' or ‘not significantly probative.'” Baloco v. Drummond Co., Inc., 767 F.3d 1229, 1246 (11th Cir. 2014). Courts must not make credibility assessments or weigh conflicting evidence at the summary judgment stage. See Hairston v. Gainesville Sun Pub. Co., 9 F.3d 913, 919 (11th Cir. 1993). Rather, courts must: (1) view the record evidence in the light most favorable to the non-moving party; and (2) draw all reasonable inferences in favor of the non-moving party. See White v. Pauly, 137 S.Ct. 548, 550 (2017). If a reasonable fact finder could draw more than one inference from the facts and that inference creates an issue of material fact, a court must not grant summary judgment. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).

         B. Applicable Law

         For purposes of summary judgment, the substantive law applicable to the case determines what facts are material. See Hickson, 357 F.3d at 1259. Here, the parties agree that the Court should apply Virginia law and federal contract law in accordance with Part II, Paragraph 29 of the Subcontract (“Term 29”), [4] which provides:

This Agreement and performance hereunder shall be interpreted in accordance with, and governed by, the substantive laws of the Commonwealth of Virginia, except for that body of law commonly referred to as Conflict of Laws. Provided, however, that if this Agreement is issued under a prime contract and where federal contract law exists on substantive matters requiring construction under this Agreement, such matters shall be construed in accordance with the applicable federal law. . . .

(Doc. 52-1, p. 18 (emphasis added); see Doc. 70, p. 14.)

         In diversity cases, this Court applies Florida law to resolve choice-of-law issues. See Interface Kanner, LLC v. JP Morgan Chase Bank, N.A., 704 F.3d 927, 932 (11th Cir. 2013). Florida courts apply the substantive law of a foreign forum when: (1) the parties have agreed to the application of such law in a written agreement; and (2) the law of the designated forum does not contravene Florida's “strong public policy.” Id. (quoting Maxcess, Inc. v. Lucent Techs., Inc., 433 F.3d 1337, 1341 (11th Cir. 2005)). There is no dispute that the Subcontract was issued under a prime contract, and the parties have not argued that federal contract law or Virginia law contravenes strong public policy in Florida. (See Doc. 59, ¶¶ 24, 26.) Thus, the Court will enforce Term 29 and apply federal contract law to contract interpretation and construction issues and will apply Virginia to the remaining substantive issues.

         C. Virginia Law

         Recovery for breach of contract under Virginia law, requires proof of: “(1) a legally enforceable obligation of a defendant to a plaintiff; (2) the defendant's violation or breach of that obligation; and (3) injury or damage to the plaintiff caused by the breach.” Filak v. George, 594 S.E.2d 610, 619 (Va. 2004). Virginia implies a duty to act in good faith when exercising contractual discretion, and a plaintiff may base its breach of contract claim on a defendant's breach of the “covenant of good faith and fair dealing.” See Levine v. Selective Ins. Co. of Am., 462 S.E.2d 81, 84 (Va. 1995); see also Va. Vermiculite, Ltd. v. W.R. Grace & Co.-Conn., 156 F.3d 535, 542 (4thCir. 1998) (noting that “the duty of good faith does not prevent a party from exercising its explicit contractual rights”).

         “The obligation to pay damages arising from an unexcused breach of contract is implied” by Virginia law. Mullen v. Brantley, 195 S.E.2d 696, 700-01 (Va. 1973); see Clevert v. Jeff W. Soden, Inc., 400 S.E.2d 181, 182 (Va. 1991) (noting that enforcement of a contract “includes a recovery of damages for any breach, whether total or partial”). Generally, “the proper measure of unliquidated damages for breach of contract ‘is the sum that would put [the plaintiff] in the same position, as far as money can do it, as if the contract had been performed.'” Nichols Const. Corp. v. Va. Machine Tool Co., LLC, 661 S.E.2d 467, 471 (Va. 2008). This sum need not be proved with exact mathematical precision-“a reasonable basis of computation” suffices. See Mullen, 195 S.E.2d at 701.[5]

         III. The Undisputed Facts

         A. The Parties

         Yang is a women-owned business “that provides design engineering, IT, facility operations and maintenance, logistics and project management services” to federal and state governments and commercial entities. (See Doc. 59, ¶5.) SCLS is a private contractor who performs “operations and maintenance of critical facilities that belong to the United States Department of the Air Force” (“USAF”). (See id. ¶4; see also Doc. 51-1, p. 34.)

         B. The Teaming Agreement

          The parties' “relationship began in 2004 when SCLS's predecessor, DynCorp Technical Services, LLC” (“DynCorp”) and Yang agreed to work together to submit a bid (“Bid”) in response to a government contract solicitation that concerned a launch operation and support contract (“LOSC”) for facilities in Cape Canaveral, Florida. (See Doc. 59, ¶3; see also Doc. 51-5, p. 30.) In a written agreement dated January 23, 2004 (“Teaming Agreement”), [6] Yang and DynCorp set forth the terms under which they agreed to collaborate on the Bid. (See Doc. 59, ¶¶9, 10, 11.) The Teaming Agreement anticipated that if the Bid was successful, then the parties would enter into a subcontract based on the “scope of work set forth in Exhibit A” (“Exhibit A”). (See Doc. 59, ¶12; see also Teaming Agreement, Articles 1.1, 2.4, 3.1-3.3, 4.2-4.4.)

         Exhibit A states that DynCorp “shall be the prime contractor with [Yang] assuming the role of a subcontractor on an exclusive basis, ” and:

It is anticipated that [Yang's] associated share of the work scope will be no less than 12% of the total contract value. Identification of the specific scope of work for which [Yang] shall be responsible will be further defined once the review of the draft RFP and the formal RFP have been completed.

(Teaming Agreement, Exhibit A.) Recognizing that revisions may be required, Yang agreed that it would “enter into good faith negotiations” to revise Exhibit A on DynCorp's request, and DynCorp agreed that it would not make this request absent a “good faith belief that such is necessary.” (See id. Article 2.4.)

         C. The Prime Contract[7]

         The Bid-which SCLS submitted with Yang's assistance-was successful, and the USAF, 45th Space Wing Division (“45 SW”) awarded Prime Contract Number FA2521-05-C-0008 to SCLS in April of 2005 (“Prime Contract”). (See Doc. 59, ¶¶13-14, 16-18, 22.) The first forty-nine pages of the Prime Contract are organized into sections A through I, which include:

§ A-Solicitation, Offer and Award Form;
§ B-Supplies or Services and Prices/Costs;
§ C-Description/Specs/Work Statement;
§ F-Deliveries or Performance;
§ H-Special Contract Requirements; and
§ I-Contract Clauses.

         Section J starts on page fifty, and it provides sixteen Attachments, which cover hundreds of pages.

         The stated purposes of the Prime Contract are to provide both “launch operations support technical expertise and services to support the [45 SW] in execution of its mission [payload/satellite processing and launch of those payloads into space]” and “operations, maintenance and engineering support to critical launch, spacecraft and ordnance [sic] facilities and support systems owned by the [45 SW].” (See id. ¶19; Prime Contract, § C001 & Attachment 1 (providing a “Statement of Objectives” for the Prime Contract (“SOO”)).) The services and materials necessary to accomplish such purposes are set out in a lengthy “Performance Work Statement” (“Prime PWS”).[8] (See Prime Contract, § C002.)

         1. Total Funded Contract Value

         The Prime Contract is an incrementally-funded Cost Plus Award Fee Contract (“CPAF”);[9] thus, payments under the Prime Contract consist only of allowable costs actually incurred to provide the requested services and materials (“Costs”), a “Base Fee” of 3% of Costs, and an “Award Fee” of up to 5% of Costs. (See Doc. 59, ¶ 22; see also Prime Contract, §§ B001, B003, H012(a)(1)).) Along with contract line item numbers (“CLINs”), [10] the Prime Contract provides dollar figures (“Estimated Figures”) for the estimated Costs, Base Fees, and maximum Award Fees (“MAF”), [11] during the maximum contract term of ten years and five months (“Term Limit”). (See Prime Contract, §§ B & F.) The Term Limit consists of a “Transition/Phase-In” Period (May 2 to June 30, 2005) and a “BasicPeriod (July 1 to September 30, 2005), followed by ten optional periods of performance (“Contract Periods”) covering fiscal years (“FY”) 2006 through 2015.[12] (See Prime Contract, § B; Doc. 51-4, p. 37.) Added together, the Estimated Figures for all Contract Periods totaled $297, 683, 218 (“Total Funded Contract Value”).[13]

         Ultimately, the Term Limit was reached because, at the end of each Contract Period, 45 SW extended the Prime Contract in accordance with the “Option Clause.”[14](See Prime Contract, § I (incorporating the full text of FAR § 52.217-9); see also Doc. 52-1, pp. 43-44 (providing table listing all final Award Fees); Docs. 53-1 to 53-9 (providing copies of Subcontract modifications).) Further, the actual payments made to SCLS by 45 SW for the initial Term Limit (“Actual Contract Value”) exceeded the Total Funded Contract Value. (See Doc. 51-2, pp. 28, 71-72; Doc. 51-4, pp. 39-40, 43-44, 53-54.)

         2. Minimum Subcontracting Requirement

         45 SW did not intend that SCLS would directly provide all of the goods and services called for under the Prime Contract. To the contrary, 45 SW intended that SCLS would provide “small business” (“SB”) concerns with the “maximum practicable opportunity to participate in performance of launch operations and support.”[15](See Prime Contract, § H008(a).) Thus, SCLS agreed to, “consistent with efficient contract performance, ” subcontract “a minimum of 18% of the total funded contract value for the basic effort and each subsequent option period, including any quantity increases, to [SBs]” (“Minimum Subcontracting Requirement”). (See id. § H008(b) (emphasis added).)

          In its required subcontracting plan, SCLS represented that the Prime Contract had a “total estimated contract value” of $334, 699, 214, [16] and SCLS planned to subcontract 20.4% of this amount-an “estimated” $68, 409, 598.[17] (See id. at Attachment 5, p. 2.) SCLS represented that the “majority” of its “planned subcontracting” would be with “ExecuSys, ...


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