USA UP Star, LLC v. Sanford Fed.

1

USA UP STAR, LLC, Plaintiff, v. SANFORD FEDERAL, INC., d/b/a FAR GROUP, Defendant.

CIVIL No. 1:23cv1234 (DJN)

United States District Court, E.D. Virginia, Alexandria Division

June 13, 2024

MEMORANDUM OPINION

David J. Novak, United States District Judge

In March 2023, the United States contracted with Sanford Federal, Inc. to provide “sustainment support” for an Army training event in south-central Indiana. Unfortunately, Sanford won the contract less than two weeks before performance was to begin, and, scrambling to hold up its end of the deal, Sanford entered negotiations with a subcontractor to do the work instead. Over two brief weeks Sanford and the subcontractor, USA Up Star, LLC, hashed out most of an agreement; running out of time, the two companies signed the instrument subject to the resolution of two remaining open terms. Negotiations continued, and eventually the parties reached a deal - or so they thought.

Mere days later, the Army threw a wrench in the works by “descoping” the most expensive (and most profitable) line item out of its contract with Sanford. This twist revealed, or perhaps motivated, the parties to form irreconcilable ideas about what price Sanford had contracted to pay for Up Star's services given the Army's partial termination. Sanford thought that it had agreed to pay Up Star $2.95 million. Up Star thought that it was owed $3.5 million. The parties could not bridge their six-figure disagreement, their relationship soured, and when Sanford ultimately refused to pay Up Star's final invoice, Up Star sued. This case was the result.

Up Star's lawsuit now comes before the Court on the parties' cross motions for summary judgment (ECF Nos. 35 37), which the Court has converted to motions for judgment on the record. (ECF No. 46.) This Memorandum Opinion constitutes the Court's findings of fact and conclusions of law following a bench trial “on the papers.” After addressing each of Up Star's claims, the Court concludes that Sanford has the better view of the parties' negotiations, but that Sanford has no right to withhold the undisputed portion of the contract price. The Court will accordingly GRANT IN PART and DENY IN PART both parties' motions.

I. FINDINGS OF HISTORICAL FACT^[1]

On February 27, 2023, the United States requested quotes for a contract to house and support military personnel during a U.S. Army training event at Camp Atterbury, Indiana, in April and May of that year. That contract (the “Army Contract”) came with a Performance of Work Statement (“PWS”) which included nine different Contract Line-Item Numbers (“CLINs”) that the contractor was to perform. Performance was to begin on April 1,2023, and continue until May 16. (ECF No. 36-1 (“Army PWS”) at 3.) The first CLIN, “Field Feeding,” required the contractor to “provide all labor, supervision quality control, preparation, cooking, serving, sanitation and site clean-up” required to ensure that event participants received two meals a day, every day, for the duration of the training, beginning on April 13, 2023. (Id. at 17.)

Defendant Sanford Federal, Inc. won the Army Contract on March 24,2023, at a price of $4.82 million, and it opened the doors to subcontractors immediately. On March 25, Plaintiff USA Up Star, LLC contacted Sanford and offered to perform the entire Army Contract for $4.36 million. The next day, March 26, Up Star followed up with a $100,000 discount, reducing its bid to $4.26 million, “based on the assumption” that Up Star would perform the entire Army

Contract. (ECF No. 36-2 at 1.) Apparently, Sanford liked Up Star's discount, and Sanford emailed Up Star a Notice to Proceed (“NTP”) on March 27. The NTP required Up Star to begin performing on March 28 and committed the parties to “negotiate and execute a subcontract agreement within 48 hours.” (ECF No. 36-3.) Up Star toured the site of performance on the day that Sanford issued the NTP.

On March 28, Up Star sent Sanford a report of its site visit, and Sanford relayed a list of questions contained in that report to the Army. Up Star had questions about the Field Feeding CLIN. Specifically, Up Star wanted to know whether the Army would provide Up Star with Unitized Group Rations (“UGR-As”) that Up Star could then prepare.^[2] The Army responded on March 29 and informed both Sanford and Up Star that the Army would not provide any food. Sanford then e-mailed Up Star a proposed subcontract agreement based on Up Star's quote for $4.26 million.

On March 30, Up Star revised its price upward to $4.66 million to reflect the cost of providing its own food. (ECF No. 36-7 (the “Revised Estimate E-mail”) at 1-2.) As Up Star explained, its March 26 quote incorrectly presumed that it would have access to UGR-As when performing the Field Feeding CLIN. Without UGR-As, Up Star said, Field Feeding would cost at least an additional $800,000 to perform. To sweeten the deal, Up Star offered to “split the cost with [Sanford] by taking additional margin from tents.” (Id. at 1.) To summarize, Up Star's email arrived at a total revised price of $4.66 million by adding $800,000 to the cost of Field Feeding and subtracting $400,000 from the cost of providing tents for Army personnel. As before, Up Star premised this pricing “on the assumption” that Up Star would perform the entire subcontract, “as [its initial] discount was across the board, not based on any one item,” and it explained that its quoted price reflected “the cost associated with [] Up Star doing the entire scope as estimated.” (Id. at 1-2.)

During the evening of March 30, Paul Switzer, Up Star's Senior Director of Purchasing and Subcontracts, e-mailed Sanford a signed copy of the subcontract agreement that Sanford provided the previous day. Because Up Star disagreed with that Subcontract's price schedule, Up Star attached a separate document titled “Exceptions to the Agreement - PBS 3-30-23” (the “Exceptions Agreement”) and a copy of the Revised Estimate E-mail, now titled “Attachment 1 - Revised Estimate - USA Up Star - PBS 3-30-23.” The Exceptions Agreement bears Up Star's logo and lists Switzer as the “[Requestor.” (ECF No. 36-13 at 1.) All of the circumstances therefore suggest that Up Star drafted the Exceptions Agreement.

When signing the Subcontract, Up Star's representative placed a footnote underneath his signature that read as follows: “Contingent [on] amicable resolution of [the Exceptions Agreement].” (ECF No. 36-9 at 1.) Switzer's e-mail asked Sanford to “[p]lease review and execute upon approval,” and told Sanford that Up Star would “commit... to work through the exceptions in good faith on or before the deadline set forth in the agreement and exceptions document.” (ECF No. 40-6.) On Friday, March 31, Daniel Lynam, Sanford's Vice President, countersigned the Subcontract and the Exceptions Agreement; like Switzer, Lynam left a footnote under his signature to the Subcontract reading “Contingent [on] amicable resolution of [the Exceptions Agreement].” (ECF No. 36-12 (Subcontract) at 1.)

The Subcontract states that Up Star would invoice Sanford “pursuant to the invoicing schedule under Exhibit A.” (Subcontract § 1.5, at 2.) Exhibit A, reproduced below, set out prices for each CLIN that Up Star would perform, adding up to a total of $4.26 million:

Clin N'

SUPPLIES/ SERVICES

Quantity

Unit

Unit Price

Total

Clin 0001

Field Feeding

Job

$ 1,307,334.10

$ 1,307,334.10

Clin 0002

Temporary Tents Soldiers 60SQ FT

Job

$ 1,662,323.77

$ 1,662,323.77

Clin 0003

Tent Structure Dining Facility

Job

$ 127,187.57

$ 127,187.67

Clin 0004

Material Handling Equipment

Each

$ 20,123.18

$ 40,246.35

Clin 0005

Shower Support

9

Each

$ 9,681.62

$ 87,134.55

Clin 0006

Washer and Dryer Support

Each

$ 52,577.80

$ 157,733.41

Clin 0007

Office Trailers

Each

$ 11,259.16

$ 33,777.47

Clin 0008

Field Sanitation Support

Job

$ 43,713.94

$ 43,713.94

Clin 0009

Bulk Potable Water Storage and Delivery

Job

$ 728,899.23

$ 728,899.23

Clin 0010

Gray Water Storage and Removal

Job

$ 70,649.51

$ 70,649.51

Total

$ 4,259,000.00

(Subcontract Ex. A, at 9.) The Subcontract also designated an invoicing procedure pursuant to which Up Star would be paid:

[Up Star] shall invoice [Sanford], pursuant to the invoicing schedule under Exhibit A, based on Services completed and accepted in accordance with the terms of the Subcontract.

Invoices shall be separately numbered and sent to [Sanford] via email at. [he] If [Up Star's] invoice does not comply with the requirements contained in this Subcontract [Sanford] reserves the right to reject the invoice. Payment of rejected invoices may be delayed pending correction of any errors or omissions.

Unless otherwise specified in [an order issued by Sanford's procurement representatives], the terms of payment are Net 30 days from the date of [Sanford's] receipt of [Up Star's] complete and correct invoice containing all required information and supporting documentation requested by Sanford[.]

(Subcontract § 1.5.) Exhibit A itself provided a set of “invoicing instructions,” specifying that invoices should be sent to a particular e-mail address, “include all checklists for the period being invoiced,” and “clearly state[] Period of Performance, Invoice Date, Due Date, and include banking/payment instructions.” (Subcontract Ex. A, at 9.) In addition, those instructions specified the amount of Up Star's invoices. First, Sanford would pay Up Star's “[m]obilization and demobilization” costs at a price of “$300,000 NET 15”; next, Sanford would make a progress payment of “up to $1,500,000 upon government approval NET 20”; and finally, the remainder of Up Star's invoice was required to be “billed upon completion and confirmation of the services by the client NET 25.” (Id.)

The...