On March 9,
1998, Hamilton Securities Advisory Services, Inc. (hereinafter "Hamilton")
[Plaintiff] brought a breach of contract action in the United States
Court of Federal Claims against the U.S. Department of Housing and
Development ("HUD") [Defendant] seeking approximately
$1.5 million plus interest for work the company performed under
its "crosscutting" financial advisory contract with HUD. The dispute
arose when HUD failed to pay Hamilton the last two installment payments
due under its financial advisory contract. HUD cancelled the financial
advisory contract for the convenience of the government on October
17, 1997. HUD notified Hamilton it was withholding such payment
as the result of a breach of the contract on Hamiltonís part. HUDís
claim of a breach allegedly arose as a result of a discrepancy in
instructions provided to Lucent/Bell Labs, a subcontractor, concerning
the running of a bid optimization program. Hamilton informed the
FHA Comptroller and Assistant Secretary/FHA Commissioner about the
discrepancy, in writing, in December of 1996.
Defendantís First Request for Production of Documents
that Hamilton produce documents relative to the optimization program,
how it was run, and its intended results. HUD further sought documents
relating to any discrepancies or errors in past loan sales of which
Hamilton was aware.
Response to Defendantís First Request for Production of Documents
non-privileged documents relevant to HUDís inquiry.
Defendantís Unopposed Motion for Enlargement of Time to Respond
HUD filed its
first unopposed request for additional time to respond to Hamiltonís
Complaint. The request was granted on May 7, 1998.
David J. Gottesman,
Esq., Trial Attorney, Commercial Litigation Branch, Department of
Justice, entered his appearance for the United States.
Granting Defendantís Motion for an Enlargement of Time
Motion to Dismiss for Lack of Subject Matter Jurisdiction
that the court lacks jurisdiction due to Hamiltonís premature filing
of its claim. In support of the motion, the government states that
the 60-day "deemed denial" provision of the Contracts
Dispute Act ("CDA") did not take effect. HUD stated that
the initial complaint filed [as a Motion for Temporary Restraining
Order in the Federal District Court for the District of Columbia]
on January 8, 1998, although dismissed, divested the contracting
officer of his or her authority at the time of such filing, thereby
stopping the 60-day response time required before the filing of
a claim. Therefore, HUD argues that the action filed March 9, 1998
to which the current motion refers is also premature. In addition,
HUD argues that Hamiltonís failure to wait for the district court
to dismiss the original complaint before filing this action precludes
Court of Federal Claims jurisdiction.
Plaintiffís Response to Defendantís Motion to Dismiss for Lack of
Subject Matter Jurisdiction
to HUDís Motion to Dismiss, Hamilton argued that the contracting
officer constructively denied its claim and issued a final decision
against Hamilton with regard to its claim. Hamilton argued that
none of its claims were pending before the district court when the
suit at issue was filed. Finally, Hamilton argued the district court
action involved conceptually different claims based on statutory
and constitutional grounds and not on contract and, therefore, jurisdiction
Defendantís Reply In Support of Motion to Dismiss
the claims in its initial Motion to Dismiss. It specifically
states that the contracting officerís October 17, 1997 demand
letter contained language that precluded it from being a
final decision. The government reiterated that Hamiltonís premature
filing of the suit in district court tolled the running of the sixty-day
"deemed denial" period. Finally, it argued that the district
court case involved the same claim at issue.
Opinion Denying Motion to Dismiss for Lack of Subject Matter Jurisdiction
claims court found that the 60-day "deemed denial" period
between Hamiltonís December 10, 1997 letter and the filing of suit
in the Court of Federal Claims on March 9, 1998 had not lapsed due
to the "in litigation bar." The "in litigation bar"
divests the contracting officer of his or her obligation and authority
to deny or admit contract claims within the 60-day time limit imposed
by the Contracts Disputes Act ("CDA") when the claim at
issue is in litigation. The court further found that Hamiltonís
October 22, 1997 and November 13, 1997 letters did not include a
sum certain, nor were they certified as required by statute. Therefore,
the letters did not constitute "claims" under the CDA and, for this
reason, the contracting officer was not obligated to act. However,
the court did conclude that the contracting officerís October
17, 1997 letter was a final decision on the governmentís claim
because it clearly determined Hamiltonís liability and damages.
The court concluded that it had jurisdiction to hear Hamiltonís
appeal of the contracting officerís final decision on the HUD setoff
claim and claim for payment under the contract.
Granting Motion to Extend Time to Defendant
Motion to Extend Time to File Joint Status Report
Order Granting Motion to Extend Time to File Joint Status Report
Defendantís Answer to Complaint and Counterclaim
In its Answer,
HUD admitted that it refused to pay Hamiltonís certified claim.
HUD justified withholding payment of amounts owed to Hamilton because
HUD had offset that amount against the governmentís damages as the
result of Hamiltonís alleged breach of contract. In the counterclaim,
HUD claimed that Hamiltonís acts or omissions constituted a breach
of its obligations under the contracts and requested damages in
the amount of "at least" $3.8 million.
Plaintiffís Answer to Defendantís Counterclaim
In its Answer
Hamilton denies the allegation that the two contracts in question
required Hamilton to identify the group of bids that would produce
the maximum sale proceeds to HUD. Hamilton also reiterated that
it did not guarantee, and had no obligation to guarantee, that HUD
actually received maximum revenues from the West of the Mississippi
or North Central loan sales. Hamilton acknowledged that if the floor
discrepancy had not existed, and assuming all accepted bids had
gone to closing and other variables were construed in HUDís
favor, HUD might have collected additional revenues on the West
of Mississippi and North Central sales.
The Order states
that the court received a joint status report. Hamilton informed
the court that it intended to file a motion for summary judgment.
The parties were told when their submission of joint stipulation
of facts and issues of law was due. A status conference was scheduled
for August 10, 1999.
Unopposed Motion to Reschedule Status Conference
defendantís Unopposed Motion to Reschedule status conference. Conference
rescheduled for August 17, 1999.
Motion for Leave to File First Amended Counterclaim
that it be permitted to add a second count to the counterclaim alleging,
additionally or alternatively to count I (breach of contract), that
Hamilton was negligent and negligently misrepresented information
to HUD, making Hamilton liable for damages.
Motion to Enlarge Time for Filing Stipulations and Joint Status
partiesí motion for enlargement of time and ordered parties to file
the three joint documents on or before August 10, 1999.
Statement of Additional Facts that Preclude Summary Judgment for
that Hamilton was responsible for determining which bids were winning
bids. In addition, HUD alleged that the representations by Hamilton
were false. HUD further claimed that if only those bids that met
the applicable criteria had been selected as winning bids, such
bids would have generated greater revenue for the agency.
Joint Stipulation of Facts
Joint Statement Regarding Issues of Law
The court granted
Defendantís Motion to File Amended Counterclaim and set forth a
directing the clerkís office to return Plaintiffís Separate Statement
of Facts for reaccomplishment and resubmission.
The judge required
that the Separate Statement of Facts be resubmitted in bound form.
Separate Statement of Facts as to which there is no Genuine Dispute
Separate Statement of Facts submitted to the court set out the effects
of the optimization instruction discrepancy. [note: Plaintiff
and Defendant were unable to agree on the joint statement of facts
not in dispute requested by the judge]. Hamilton specifically stated
that the National Performing Sale was unaffected by the floor discrepancy
and the proceeds to HUD from the West of the Mississippi sale exceeded
the approved credit subsidy amount of $277.5 million by $107.8 million.
First Set of Interrogatories
Second Request for Production of Documents
Joint Status Report
Reply to Defendantís First Amended Counterclaim
Answers to Defendantís First Set of Interrogatories
Plaintiffís Response to Defendantís Second Request for Production
Memorandum of Law Regarding Application of the Inspection of Services
that the Inspection of Services Clause in the contract between Hamilton
and HUD does not preclude its counterclaim. It stated that the Clause
does not contain language limiting Plaintiffís liability or preclude
claims against it. HUD further argued that the Clause does not apply
to the sort of losses (i.e., consequential damages) claimed
by HUD. Next, it argued that the Clause does not preclude breach
of contract claims seeking other relief. It further stated that
the Clause does not apply to completed, paid contracts such as the
one HUDís claim is based upon. Finally, HUD argued that the Clause
does not preclude tort claims such as the claims they allege.
Plaintiffís Brief in Support of Its Motion in Limine
issues addressed in the motion include (1) whether the Inspection
of Services Clause provides a price adjustment for defects in services
rendered by Hamilton; (2) whether the Inspection of Services Clause
is HUDís exclusive remedy because it affords complete relief in
the form of a price adjustment; and (3) whether HUDís tort claim
is barred by the Economic Loss Rule.
HUD acknowledged that Hamilton is entitled to the claimed amount,
but HUD has withheld payment based solely on an alleged right of
setoff premised on a counterclaim in the amount of "at least
$3.8 million." Hamilton asserted that HUD has no entitlement
to recover under either a breach of contract or tort theory because
Hamiltonís contracts contain a remedy granting provision covering
the precise contingency presented in the contract.
Hamilton also asserted that the Inspection of Services Clause allows
an equitable adjustment in price in the event the contractor renders
defective services. The adjustment is based on the price of the
defective services and not on damage to the government. In
addition, Hamilton asserted that HUDís tort claim is barred by the
Economic Loss Rule, which bars litigants from recovering for economic
losses suffered as a result of a breach of duties assumed only by
Plaintiffís Reply to Defendantís Memorandum of Law Regarding Application
of the Inspection of Services Clause
that the Inspection of Services Clause in the contract provides
an exclusive remedy for contract disputes and that HUD is attempting
to seek a different remedy because it is unhappy with the bargain
it made. Plaintiff replied to HUDís argument that it should be allowed
to proceed with a breach of contract counterclaim with respect to
contract #18161, the West of the Mississippi loan sale, because
that contract was completed, thereby making the Inspection of Services
Clause inapplicable. Hamilton responded by reasoning that under
HUDís interpretation, the contract is closed, and therefore all
rights and obligations under it have been finally and conclusively
settled, and neither party may proceed under the contract. Hamilton
also responded to HUDís negligence allegations by arguing that tort
claims are barred because any duty on the part of the government
contractor arises solely by reason of and as expressly provided
for in the contract.
Defendantís Reply to Plaintiffís Brief in Support of Its Motion
Motion by Hamilton Securities, USA for Protective Order
Protective Order Granting Motion for Protective Order