[00:00:00] Speaker 02:
7 JKB Solutions and Services versus the United States.

[00:00:05] Speaker 02:
Mr. Laskaroff, please proceed when you're ready.

[00:00:26] Speaker 04:
Thank you, honor.

[00:00:27] Speaker 04:
If it may please the court, my name is Bill Descaro.

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And I'll take this off because you may not be able to hear.

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I represent JKB Solutions in this appeal.

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And I want to address what I believe is a threshold issue here in this case related to the lack of existence of a applicable termination for convenience clause.

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in this contract.

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In the trial court below, a summary judgment was issued based upon the fact that there was a termination for convenience clause included in the contract, but it related not to

[00:01:25] Speaker 02:
Well, tell me, I'm sorry, didn't the contract incorporate FAR 52.212-4?

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And I'll admit to not knowing what all of those numbers always correspond to.

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But the argument has been made that that is the relevant termination for convenience language.

[00:01:41] Speaker 04:
It did include that clause, but there are numerous reasons why that is not the appropriate clause.

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And is it because your argument is that that clause is limited to commercial contracts?

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Is that why?

[00:01:55] Speaker 04:
To commercial items, Your Honor, and this obviously is a services contract involved in the teaching of government employees how to

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perform government contracting under government regulations.

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Is there anything in the language of the regulation or the text that you rely on?

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I mean I know you rely on the header and that's a good point.

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It says commercial items but is there anything in the text of that FAR provision that would support your position?

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The provision itself does

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refer to commercial items in several places within the text but before I get there your honor I would like to point out that and we do address this in our brief particularly and straight to the point under 52 212-4 before the clause is set forth in the federal acquisition regulations

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the Federal Acquisition Regulations say as prescribed in 12.301B3.

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Insert the following clause.

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So if you go to 12.301, it is entitled Solicitation Provisions and Contract Clauses for the Acquisition of Commercial Items.

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Paragraph A says, in accordance with 41 USC 3307, contracts for the acquisition of commercial items shall, to the maximum extent practicable, include only those clauses, one, required to implement provisions of law or executive orders applicable to the acquisition of commercial items, or two, determined to be consistent with customary commercial practice.

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Paragraph B then says, so we're at 12.301B, insert the following provisions in solicitations for the acquisition of commercial items and clauses in the solicitations and contracts for acquisition of commercial items.

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So it's your position that there's nothing in FAR anywhere that would allow

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for a termination for convenience clause in a services contract?

[00:04:27] Speaker 04:
Your Honor, there has not been one identified on our side, and the government has not identified one.

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OK, so you're saying that basically services contracts, there's never a termination for convenience.

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Well, Your Honor, I think that under this circumstance where it is a services contract that was an IDIQ contract,

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there has not been identified a provision that would allow that.

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And that is required in order to terminate for convenience.

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And so it is a threshold issue.

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The briefs have been sent in.

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We don't see any indication.

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And the court below found simply that because there was this

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52.214-4, then even though it had been two years after the performance of the contract, that it could still be retroactively terminated constructively for convenience.

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So is it your position that basically the incorporation of this FAR provision into the contract

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was essentially meaningless.

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Well, Your Honor, it did not apply.

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It has meaning in an appropriate circumstance, but it didn't apply to this contract because- So why then, at the time that you entered into this contract, why didn't you object to that language and say, you can't put a termination for convenience clause in this contract because it doesn't apply?

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Your Honor, that did not occur.

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I acknowledge that it did not occur.

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But if it wasn't applicable, there's nothing really to object to because it doesn't apply.

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And I don't know that my client, you know, I cannot honestly state to Your Honors that my client knew it was there, understood that it applied only to commercial items.

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ignored it because it wasn't relevant.

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But the short answer is it doesn't apply.

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And so there's nothing to object to because it just doesn't apply.

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And what we believe we have here is, in essence, the court, long after all of this occurred, is retroactively terminating it based upon a rewriting

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of the contract because there isn't a clause there that allows it.

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Let me understand what you're arguing and what you're not arguing.

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So if we were to find that despite the linguistic hooks that you are pointing out, that it still can be incorporated into this contract, you're not disputing that there is such a thing as constructive termination for convenience, are you?

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No, we're not arguing that, but there has to be

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a clause that permits it and our position is that this one doesn't and there isn't one that does.

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The government agrees that it had an obligation and that their excuse now purportedly retroactively, that's a separate question, but they do agree that they terminated each year's contract, let's say prematurely,

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for their convenience, and they make quite a point out of the fact that you, your client, has never submitted a claim for costs, for compensation, or in accordance with the rules of termination

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those costs would not necessarily have added up to very much.

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There may or may not have been a debate about lost profits, but they do stress that there has been no monetary claim.

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Is that an accurate reading of their position and where things stand?

[00:08:50] Speaker 04:
That is correct.

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There has not been a monetary claim under the belated termination

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for convenience, constructive termination for convenience.

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That would not include, and our claim is breach of contract, our lost profits.

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And that is the reason we brought the claim, because the facts of the case are that in each of the three years, we have a services contract under task orders.

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It's an IDIQ contract.

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But under task orders, for each of the three years, they ordered the entire amount, a lot, with 14 courses.

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But they only used eight some years, 11, and other years, different numbers.

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And we claimed that we had to stand ready, willing, and able to perform that work, and that it was not properly terminated.

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We billed for it, and it should have been paid.

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Our damages are lost profits.

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And so the reason we didn't present any claim is that we don't believe that there is a proper termination for convenience.

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And we had sued on what we do believe we're entitled to, and that is the lost profits for their failure.

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In essence, they retroactively terminated them because they decided during the course of events, they would substitute their own teachers, save money.

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But they knew they could do that before they awarded us the 14 courses in each of the three years.

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And so we do believe that there is a bad faith element to this, that it was done knowing that before they awarded the 14 lot of teaching assignments to us, they could have just assigned them directly to their own people and not ordered under the task orders.

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But instead of doing that, they awarded to us.

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They gave us the expectation that we needed to gear up for and teach 14, and then they never scheduled them.

[00:11:02] Speaker 02:
Can I ask you to turn to page 111 of the appendix?

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I just want to make sure I understand what I'm looking at.

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I want to walk through this document with you.

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What is this on page 111 of the appendix?

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Contracted the government or at least is it their solicitation?

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I would what exactly is this?

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So what exactly is this?

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I believe that

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It says solicitation contract.

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Yes.

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Is this the contract between you and them, or is this your company and them, or is this not the contract?

[00:11:59] Speaker 02:
I'm just trying to understand.

[00:12:01] Speaker 04:
Your Honor, I believe this is the contract.

[00:12:10] Speaker 02:
Okay, and so this is, I think it is too.

[00:12:12] Speaker 04:
Yes.

[00:12:13] Speaker 02:
At least that's my, what I was able to find, I think.

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So this is the contract between you, and what was the contract for?

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It was for, am I understanding, teaching services?

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What was the training services?

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What exactly was the goods or services that this contract was awarded for?

[00:12:34] Speaker 04:
Yes, if you turn to page 114, training instructor services and ordering period, it was to teach.

[00:12:46] Speaker 02:
Right.

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So what I'm trying to get at is if you look at the top of the contract on 111, it lists itself as a solicitation contract order for commercial items.

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You've made a distinction between items on the one hand and services on the other.

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That's how you're differentiating the inapplicability.

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That's one of your arguments for why the termination of convenience that mentions commercial items shouldn't apply to you.

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But the title of this contract is an order for commercial items, even though the description of what would be supplied as part of the service.

[00:13:24] Speaker 04:
There are many inconsistencies, Your Honor, in this contract.

[00:13:29] Speaker 02:
Yes.

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But then when you go down, you know, I've seen a lot of government contracts in the past that they don't always look like this.

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Quite frankly, they have a lot of different forms to them.

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But when you look at the there are only

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two FAR provisions incorporated by reference in this contract.

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And I say that with some surprise because sometimes I see government contracts that list like a hundred FAR provisions that are incorporated by reference, right?

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So I feel like every reasonable person would sort of stress their head and say, I have no idea what I just agreed to, but man, I agree to a lot.

[00:14:03] Speaker 02:
You know, they're all incorporated by reference.

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But this contract on its face on page 111 includes only two FAR provisions.

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One of which, 52.212-4, you're saying is inapplicable because it applies only to commercial items.

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Let me just point out to you that that FAR provision that you're saying is inapplicable is far more extensive than just termination for convenience.

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It includes limitations of liability clauses.

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It includes warranties.

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It also is the only place that includes the termination for cause provision.

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So if you're saying this FAR provision is superfluous and completely inapplicable to this contract, then theoretically you're saying all of the provisions of this FAR provision are inapplicable to this contract, which includes the warranties, the terminations for cause, everything.

[00:14:55] Speaker 02:
If you're saying ours is a service contract, this FAR provision was written only for goods so it can never apply

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man, you just wiped out an awful lot of pretty standard things like warranties that are included in government contracts.

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That feels wrong to me.

[00:15:16] Speaker 04:
Your Honor, I understand your point.

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I would say, and we address this on page 10 of our memo, that

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commercial items has nothing to do with the services that we were contracted to perform.

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Is this contract applying to both items and services such that maybe this FAR provision applied only to your provision, the portion of this contract in which you were providing goods as opposed to services, or was this 100% a service contract?

[00:15:46] Speaker 04:
This is services.

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We taught government employees that were working to procure

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goods on behalf of the government.

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I hear you, but do you see my problem?

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My problem is if I limit this far provision to commercial items, which by the way, the contract that you signed said it was a commercial items contract, not you, of course, but your client.

[00:16:08] Speaker 04:
Yes, Your Honor.

[00:16:08] Speaker 02:
You know, they signed a contract which was titled order for commercial items, even though the entire contract specifies nothing but services.

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I would point out to your honor, and I will try to more fully address your question, but if you go to 136, appendix page 136, this is a continuation sheet on page 25 and 33, there were many other

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Contract for provisions included.

[00:16:36] Speaker 02:
Yeah, this is the kind of thing I'm used to like the laundry list of things because the contract itself on page 111 Which looks like the main body of the document only incorporates those two far provisions in 27b Yes, your honor and 137 is the same 138 139 you keep going

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for a good number of pages, all the way through page 33 of 33.

[00:17:00] Speaker 04:
I think we're at 143.

[00:17:04] Speaker 04:
My point is, Your Honor, there's no way this can be a commercial

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Items contract.

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Even though your client signed a contract that was titled commercial items contract.

[00:17:16] Speaker 04:
Yes your honor and so did the government.

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Because they thought all these far provisions limited to commercial items applied to this contract.

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But I think that I don't think anyone could believe that a commercial items provision could apply to services that are to the government to train government employees to procure government goods

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None of those meet the definition of a commercial item.

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They are definitely services.

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And that's what the contract was about.

[00:17:49] Speaker 02:
And it had- I know, but my problem is, look, I think you're making an excellent argument.

[00:17:53] Speaker 02:
I do.

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But my problem is, your client signed a contract titled Commercial Items Contract, which incorporated a FAR provision dealing with applicability of various terminations and warranties to commercial items.

[00:18:08] Speaker 02:
I'm not sure it's fair to say

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your client was legitimately confused about the government's intent to import this far provision into this contract, since the title of the contract, you know, and your client signed it.

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I get your argument.

[00:18:24] Speaker 02:
It's a good one.

[00:18:24] Speaker 02:
But we should hear from the government.

[00:18:26] Speaker 02:
OK, Your Honor.

[00:18:26] Speaker 04:
Thank you.

[00:18:58] Speaker 01:
May it please the Court, the trial court correctly granted summary judgment to the United States after finding constructive termination for convenience of the United States' three task orders with JKB.

[00:19:09] Speaker 01:
Would you speak up a little, please?

[00:19:11] Speaker 01:
Certainly, Your Honor.

[00:19:13] Speaker 01:
The trial court correctly found there was no genuine issue of material fact.

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JKB did not need its burden to provide evidence of such a dispute as to a material fact.

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And it cannot do so here by raising arguments never made before the trial court.

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JKB entered into a contract that included FARC.

[00:19:33] Speaker 03:
Are you saying that they didn't argue before the trial court that this termination for convenience clause didn't apply to it?

[00:19:41] Speaker 01:
They did argue that it was irrelevant and inapplicable, but at no point did JKB explain why that meant that it should be excised from the contract that they had signed.

[00:19:53] Speaker 01:
And we demonstrated that JKB is bound by the terms of the contract that it's signed.

[00:19:59] Speaker 03:
But why are there so many provisions in the FAR talking about terminations for convenience, some with respect to items, others with respect to services, if your view that you can incorporate a termination of convenience into any contract is correct?

[00:20:19] Speaker 01:
The FAR does provide different types of termination for convenience clauses that at times seem to reflect considerations related to certain forms of contracts.

[00:20:35] Speaker 01:
As we noted, though, FAR 12.301, which describes when

[00:20:43] Speaker 01:
the contracting officer, it describes inserting this FAR 52.212-4.

[00:20:48] Speaker 01:
And it doesn't say that it can only be used in a specific type of contract.

[00:20:55] Speaker 03:
But it does refer to commercial items contracts.

[00:20:57] Speaker 01:
It does refer in that FAR section.

[00:20:59] Speaker 03:
And then you've got FAR 52.249-4 that talks about inserting these kinds of clauses in service contracts.

[00:21:09] Speaker 03:
I guess my point is, why shouldn't we take FAR at face value and say some of these relate to commercial items contracts, some of them relate to service contracts, but you can't just mix them up whenever you want to?

[00:21:22] Speaker 01:
Well, the plaintiff did not make an argument below stating that a FAR provision like 52.2

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212-4 could not be, there was a specific reason it could not be used in this context.

[00:21:39] Speaker 02:
In fact... Didn't they say it was inapplicable because this is a service contract?

[00:21:47] Speaker 02:
Yes, Your Honor.

[00:21:48] Speaker 02:
So that is the specific reason.

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So I think they did argue the specific reason.

[00:21:52] Speaker 01:
I think our position is that inapplicable and irrelevant are not reasons to excise a term out of a contract that both parties have signed.

[00:22:02] Speaker 02:
Well, it's not a matter of excising it out, it's just a matter of you included a term that wasn't relevant to the contract.

[00:22:07] Speaker 02:
I mean, it's not a matter of excising it out, it just doesn't apply.

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to this particular contract.

[00:22:13] Speaker 02:
Now, maybe you incorporate this in as a matter of standard course in every contract, but when you go on in detail that only services are being provided, you understand?

[00:22:22] Speaker 02:
I mean, a lot of these government contracts that I've seen, my God, they just incorporate the entire FAR.

[00:22:26] Speaker 02:
It's like almost without regard for what the provision covers.

[00:22:30] Speaker 02:
So why isn't it reasonable to say you incorporated this in to the extent that this contract was going to exist or be expanded to cover commercial items,

[00:22:39] Speaker 02:
This provision would then apply, but to the extent it is applying to services as opposed to goods, this provision is not going to apply.

[00:22:48] Speaker 01:
Well, number one, the only time we've seen an analysis of that nature occurs when a plaintiff has alleged a deviation.

[00:22:57] Speaker 01:
And no allegation of a deviation was made here until the reply group before this court.

[00:23:03] Speaker 01:
It was not something that the trial court had before it to consider.

[00:23:08] Speaker 01:
the plaintiff has not demonstrated that a deviation is something that occurred in this case.

[00:23:16] Speaker 01:
In fact, we did not dispute for purposes of a motion for summary judgment the plaintiff's statement that the contract was not for commercial items and was instead for services.

[00:23:28] Speaker 01:
However, we don't want the court

[00:23:32] Speaker 01:
think that it's impossible that this is a commercial items contract.

[00:23:36] Speaker 01:
If you look at FAR 2.101, the definition of commercial items includes services in certain circumstances.

[00:23:45] Speaker 01:
So there would be a factual issue that the plaintiff did not provide a dispute as to material facts.

[00:23:54] Speaker 03:
Well, that's a basis for a request for a remand if we think the summary judgment was wrong.

[00:23:58] Speaker 03:
But that's not a basis for us to affirm summary judgment.

[00:24:01] Speaker 01:
I'm only intending to point out that the plaintiff didn't raise a dispute as to material fact with regard to whether this was or was not a commercial items contract, because it did not describe the inapp.

[00:24:15] Speaker 01:
It did not show why FAR 2.101 would not have been applicable.

[00:24:19] Speaker 01:
JKB did not provide facts.

[00:24:23] Speaker 01:
It would demonstrate, for example.

[00:24:26] Speaker 03:
Well, what did the government show to prove that it would be applicable?

[00:24:31] Speaker 01:
did not, it was something that the plaintiff raised in their response to our motion for summary judgment.

[00:24:38] Speaker 01:
And for purposes of the motion for summary judgment, we did not get into that question to create a dispute, a potential dispute, because it's not a material fact.

[00:24:50] Speaker 03:
So you want us to proceed on the assumption that this is not a commercial items contract, regardless of what it says.

[00:24:58] Speaker 01:
We did not dispute that statement by JKB.

[00:25:02] Speaker 03:
OK, so we're supposed to assume it's a services contract, not a commercial items contract.

[00:25:08] Speaker 01:
That's my understanding.

[00:25:09] Speaker 01:
That is what the trial court stated, that it understood the provision to be for a different type of contract based on what it had before it in the briefing on summary judgment.

[00:25:23] Speaker 00:
However, let's talk about what happened here.

[00:25:27] Speaker 00:
because what concerns me is our government as a major source of contracts and how it deals with the public.

[00:25:37] Speaker 00:
So it's clear and not disputed that the government and this contractor entered into a deal in writing to provide a given amount of services.

[00:25:51] Speaker 00:
Let's set aside whether the services are a commodity or something else.

[00:25:57] Speaker 00:
I've set aside where the government put the wrong FAR clause as the contractor.

[00:26:06] Speaker 00:
So the government for the first year does not do what it had promised to do, which was to order a certain amount of coursework.

[00:26:16] Speaker 00:
And as to what happened, what debate went on, the record says that apparently the contractor argued where the government threw out all of this.

[00:26:26] Speaker 00:
Government doesn't say it's terminating for convenience.

[00:26:29] Speaker 00:
So they just proceed.

[00:26:31] Speaker 00:
They say, all right, let's go on with the next year.

[00:26:34] Speaker 00:
They have an option to do so.

[00:26:36] Speaker 00:
They don't fulfill their obligation.

[00:26:39] Speaker 00:
It's not disputed.

[00:26:40] Speaker 00:
They don't fulfill the obligation.

[00:26:43] Speaker 00:
It's not until several years after this debate has been continuing that the government says, well, we always have the right to terminate for convenience.

[00:26:54] Speaker 00:
So that's what we did five years ago.

[00:26:57] Speaker 00:
We did it again four years ago.

[00:26:59] Speaker 00:
We did it again three years ago.

[00:27:03] Speaker 00:
Therefore, you are entitled from the government's brief, I gather it's not disputed, to whatever damages we can figure out for termination for convenience.

[00:27:16] Speaker 00:
But you're not entitled to your lost profits.

[00:27:20] Speaker 00:
You're not entitled to your expectations.

[00:27:24] Speaker 00:
If this were any entity but the government, that argument would be a joke.

[00:27:30] Speaker 00:
There was a deal, a firm deal.

[00:27:32] Speaker 00:
It wasn't fulfilled.

[00:27:35] Speaker 00:
It was breached.

[00:27:36] Speaker 00:
It's agreed.

[00:27:37] Speaker 00:
We have years later a retrospective excuse that applies only to the government that if we have a contract, we get a better deal.

[00:27:49] Speaker 00:
We use our own teachers.

[00:27:51] Speaker 00:
So why should we pay you?

[00:27:54] Speaker 00:
And that was what happened.

[00:27:55] Speaker 00:
None of this seems to be disputed as to what happened.

[00:28:00] Speaker 00:
Now the problem for me is to what extent does the government get some kind of benevolence in its contracting interactions that the rest of the world would never be entitled to because it's the government.

[00:28:21] Speaker 00:
We know the provision for terminating for convenience

[00:28:24] Speaker 00:
I personally feel is quite an excellent concept because often contracts need to be terminated, circumstances change and so on.

[00:28:35] Speaker 00:
But in terms of obligation and the entitlement of this contractor having been ready and willing to perform and the performance just wasn't in order, where do we draw the line as to how the government

[00:28:51] Speaker 00:
when we have case after case after case, which says the government deals with the public like any other contractor.

[00:28:59] Speaker 00:
And I think the reason for that is because that's sort of what the world knows.

[00:29:07] Speaker 00:
And rather than to read the however many pages of that volume of FAR may provide, and since the government depends

[00:29:20] Speaker 00:
so heavily on the private sector to contribute all sorts of services.

[00:29:28] Speaker 00:
Why should we say, all right, five years later, you can create an excuse for why you didn't take all of the product you contracted for?

[00:29:41] Speaker 00:
If they had terminated after the first year, I would see it quite differently.

[00:29:47] Speaker 00:
But they didn't.

[00:29:49] Speaker 00:
Or after the second year.

[00:29:50] Speaker 00:
They didn't come up with this until the debate got to be in the hands of the experts like you guys.

[00:29:59] Speaker 01:
Well, Your Honor, I'll note that we do dispute a number of the points that Your Honor has stated are undisputed.

[00:30:07] Speaker 01:
However, certain were simply not material for the purposes of our motion for summary judgment.

[00:30:12] Speaker 01:
It was not required for the court to determine whether there actually was a breach of the task orders.

[00:30:18] Speaker 01:
And the court has concluded after our motion to dismiss that the task orders were ambiguous.

[00:30:23] Speaker 01:
So there hasn't been any conclusion

[00:30:26] Speaker 01:
related to what the government did.

[00:30:28] Speaker 03:
Doesn't constructive determination require a conclusion that there has been a breach?

[00:30:35] Speaker 01:
No, Your Honor.

[00:30:36] Speaker 03:
Constructive when we're talking about constructive termination after the fact.

[00:30:41] Speaker 03:
It's really only that the government doesn't have to pay for its breach, not that there's no breach.

[00:30:47] Speaker 01:
No, Your Honor.

[00:30:48] Speaker 01:
As I understand it, there is an excuse for the action.

[00:30:51] Speaker 01:
There is something that the government could, as pointed out in college,

[00:30:55] Speaker 01:
point Boat Corp.

[00:30:56] Speaker 01:
there was a legal excuse for non-performance by the government at the time of the actions alleged to be a breach.

[00:31:02] Speaker 01:
So the court doesn't have to get to the question of whether those actions were a breach.

[00:31:07] Speaker 03:
But the legal excuse here was that we just didn't feel like buying what we purchased.

[00:31:15] Speaker 01:
Well actually I will note that the

[00:31:20] Speaker 01:
plaintiff did not raise the issue of these courses not having been ordered within the first ordering period.

[00:31:28] Speaker 01:
Moving on to the second ordering period, it was quite some time before the plaintiff raised the question of, hey, you haven't been scheduling these courses that we believe are ordered through the task orders.

[00:31:39] Speaker 01:
And we argued below that the task orders do not

[00:31:45] Speaker 01:
do not order 14 courses, that's certainly their ambiguities, which the court below noted.

[00:31:52] Speaker 03:
Well, that means they're material issues of fact.

[00:31:55] Speaker 01:
No, Your Honor, because the court below did not need to reach the question of whether there was a breach.

[00:32:01] Speaker 01:
Simply, at the time of the actions, there was a legal excuse for the actions that were taken, which is that... We've said legal justification, not excuse.

[00:32:11] Speaker 03:
Right.

[00:32:11] Speaker 03:
We've never said, is there an excuse?

[00:32:13] Speaker 01:
I'd say justifiable cause as described in Nesbit.

[00:32:17] Speaker 01:
For the government's action, there is a College Point vote said a legal excuse for non-performance by the party who is sued for breach.

[00:32:27] Speaker 03:
So we said that constructively the clause, we allow the clause termination of convenience after the fact to justify the government's actions so as to limit its liability.

[00:32:41] Speaker 01:
Correct, Your Honor.

[00:32:42] Speaker 03:
but there still has to be a justifiable cause in the first instance.

[00:32:47] Speaker 01:
The justifiable cause is that there is a termination for convenience clause, which could have been relied on.

[00:32:52] Speaker 03:
Well, could have been relied on, and you could have followed the requirements to do it in writing.

[00:32:58] Speaker 03:
This is constructive termination, which is a totally different construct.

[00:33:03] Speaker 02:
Can I ask a related question?

[00:33:05] Speaker 02:
Under constructive

[00:33:07] Speaker 02:
Termination for convenience doesn't that limit JKB to some certain damages like convenience cost or something like that?

[00:33:17] Speaker 02:
That's correct, Your Honor.

[00:33:18] Speaker 02:
And is it correct that they didn't plead any such damages?

[00:33:21] Speaker 02:
So could summary judgment have been granted on the theory that if there's a that they failed to plead actual damages that they're entitled to under the theory?

[00:33:33] Speaker 01:
I believe the trial court did note that the plaintiff had not provided evidence of termination for convenience costs.

[00:33:43] Speaker 01:
Not just evidence.

[00:33:44] Speaker 01:
Did they even plead them?

[00:33:46] Speaker 01:
No, Your Honor.

[00:33:47] Speaker 02:
So they didn't even plead that they had convenience-related termination costs or whatever.

[00:33:52] Speaker 01:
So how does that impact this case?

[00:33:56] Speaker 01:
Well, Your Honor, and I see I'm coming close to running out of time, but I'd like to answer your question.

[00:34:03] Speaker 01:
JKB did, as JKB's counsel noted, allege that it had lost profits.

[00:34:19] Speaker 01:
What were there to be?

[00:34:21] Speaker 01:
Well, actually, I would like to make one point.

[00:34:24] Speaker 01:
JKB's counsel noted that it said that there was no termination for convenience clause that would apply.

[00:34:31] Speaker 01:
were this one to be found to be, you know, inapplicable, which we don't believe is the proper standard here and is waived.

[00:34:39] Speaker 01:
But plaintiffs said on pages 13 to 14 of their appellate brief that FAR 52.249-4 would be the applicable termination for convenience clause and wanted to make that clear.

[00:34:51] Speaker 01:
But the... But that wasn't incorporated in the contract.

[00:34:57] Speaker 01:
Correct, Your Honor.

[00:34:58] Speaker 01:
But if this Court were to conclude that somehow that this was an inapplicable provision, the Christian doctrine is something that we would, in our brief request, that the Court remand to allow a consideration of whether, as JKB has argued, FAR 52.249-4 should be incorporated.

[00:35:20] Speaker 03:
What were the changed circumstances here that would allow you to shift

[00:35:27] Speaker 03:
the risk of not using these services to the contractor, which is required under our case law.

[00:35:34] Speaker 01:
We disagree that they are required.

[00:35:36] Speaker 01:
The court's Krogowski decision said that that standard that was described in Torchello and Maxima is not the standard that the court is applying.

[00:35:51] Speaker 01:
Now it's stated that the

[00:35:55] Speaker 01:
standard that should apply to determine whether a contractor can bring a breach claim is the CalVar standard of whether there's been bad faith or abuse of discretion.

[00:36:10] Speaker 01:
And the main point of our motion for summary judgment is that the plaintiff did not provide any evidence of bad faith

[00:36:18] Speaker 01:
or abuse of discretion in the statement now, JKB's counsel's statement that there was bad faith is something that was never... I just want to move you back for one more second to this idea.

[00:36:28] Speaker 02:
So 52.212 includes a termination for convenience, but the title limits it to commercial items.

[00:36:37] Speaker 02:
52.249-4 is an express termination of convenience for services contracts, right?

[00:36:44] Speaker 02:
That's right.

[00:36:45] Speaker 02:
So do you agree

[00:36:48] Speaker 01:
that fifty two point two one two dash or and its particular termination convenience doesn't apply to this case because this is not goods contract is in fact a services contract no your honor and we've got our argument is that far fifty two dot two point two one two one two four is what is incorporated in the contract is on the first page of the contract and in the solicitation that the plaintiff signed there was no argument below

[00:37:18] Speaker 01:
explained why a purportedly inapplicable contract term should be simply excised and ignored as superfluous.

[00:37:28] Speaker 02:
Well, it should be ignored if it's inapplicable.

[00:37:30] Speaker 02:
I mean, I think that's kind of plain out of space, but...

[00:37:33] Speaker 02:
But, I guess my question to you is, what is your best argument, because look, the government drafted the solicitation, the government drafted the contract, and as you know, we interpret any ambiguities or discontinuities or problems against the drafter.

[00:37:46] Speaker 02:
So what is your best argument for why 52.212, which expressly by its title suggests it's applicable to commercial items,

[00:37:55] Speaker 02:
And in light of the fact that there is a different FAR that is expressly extending a termination for convenience for services, what is your best argument for why 52.212-4 should nonetheless apply to this contract even though it seems to be a pure services contract?

[00:38:17] Speaker 01:
Well, number one, that

[00:38:20] Speaker 01:
the plaintiff hasn't demonstrated that it's a pure services contract.

[00:38:23] Speaker 01:
This was not, though, something that was part of our motion for summary judgment.

[00:38:28] Speaker 02:
I just want to make sure, because I understand you've got a waiver argument.

[00:38:32] Speaker 02:
It's not a bad argument, right?

[00:38:33] Speaker 02:
I do think you brought some stuff up on appeal that was not clearly brought up below.

[00:38:37] Speaker 02:
So your argument is well heard.

[00:38:40] Speaker 02:
But what he did bring up below was 52.212-4 does not apply and cannot be the basis for the government's determination for convenience

[00:38:48] Speaker 02:
because this is a services contract.

[00:38:50] Speaker 02:
That much he brought up below.

[00:38:52] Speaker 02:
So what is your argument for why that is incorrect?

[00:38:58] Speaker 02:
Because I understand that, by the way, I'll give you a minute, don't worry about the time, I understand that even if this doesn't apply because of the existence of 249,

[00:39:07] Speaker 02:
you're entitled to a vacate remand or Christian I understand that argument very well but what is your argument for why it's unnecessary for us to go to that step and why this provision which purports to apply to goods or items could nonetheless be applicable to what might be determined to be a peer services contract he alleged as much you didn't put that in dispute below this is summary judgment I've got to accept his representation

[00:39:33] Speaker 02:
So what would you say?

[00:39:35] Speaker 01:
I would say the simple fact that the argument that a provision, a contract term, is inapplicable simply based on a heading is not enough to show that a party is not bound when it signed a contract including that term.

[00:39:54] Speaker 01:
The only argument that seems to

[00:39:58] Speaker 01:
possibly fit the situation would be the one not made until the appellant's reply brief here about a deviation.

[00:40:05] Speaker 02:
And so your view is even if on the face of the language of the FAR it doesn't apply to a particular contract, the fact that the contract included the language nonetheless in the person signed means all of its subsections do in fact apply even though on its face it appears not to apply.

[00:40:25] Speaker 01:
that's correct your honor.

[00:40:27] Speaker 02:
So what if in somebody's employment scenario it said something like you know this provision applies only to provisional employees employees during a provisional period something like that but it was in the person's employment contract do you think it then applies to them even outside their provisional period?

[00:40:50] Speaker 02:
I'm just wondering you know there are lots of contracts which might

[00:40:53] Speaker 02:
incorporate items that end up not applying.

[00:40:56] Speaker 02:
And I will tell you, I've definitely seen government contracts which incorporate FAR provisions, like hundreds of them, you know, and probably there may be some argument that not all of them completely apply to the particular goods or services at issue.

[00:41:08] Speaker 02:
You know what I mean?

[00:41:09] Speaker 02:
Sometimes the government sweeps a lot in to these contracts.

[00:41:12] Speaker 02:
so I'm just wondering what what what is there something about commercial items is there somewhere in 212-4 that mentions services as opposed to goods is there something in the definitional section elsewhere in the FAR that helps you here is there anything you can point to that helps me understand why this should apply I'll start just by saying that the question of whether

[00:41:38] Speaker 01:
an issue of an inclusion of a particular clause is a deviation.

[00:41:44] Speaker 01:
It requires, as Plaintiff noted in the reply brief, the FAR notes that such use must be inconsistent with the intent principle or substance of the prescription or related coverage on the subject matter in the FAR.

[00:41:58] Speaker 01:
Our argument was that the use of FAR 52212-4 was not inconsistent with FAR 12301, which only states that

[00:42:08] Speaker 01:
52 2 1 2 dash 4 should be inserted in certain circumstances.

[00:42:13] Speaker 02:
It doesn't say it can only be inserted in certain certain certain cases So this is like we're just going to take this as a teaching moment I was kind of hoping you were going to point to the second sentence of 52 point 2 1 2 dash 4 or maybe many other sentences which express the mentioned services So I was kind of hoping what you were going to argue instead was even though it says commercial items

[00:42:34] Speaker 02:
The far on its face is not limited to goods because in various places in the far it mentions services which means it must have been contemplated to be potentially applicable to a service contract.

[00:42:44] Speaker 01:
Is that a reasonable response?

[00:42:46] Speaker 01:
Yes, Your Honor, because section, far section 2.101 as I think we noted was

[00:42:52] Speaker 01:
it defines commercial item and it includes within the definition certain services.

[00:42:58] Speaker 01:
What does that mean?

[00:42:59] Speaker 01:
What kinds of services?

[00:43:01] Speaker 01:
Well, an example are services of a type offered and sold competitively in substantial quantities in the commercial marketplace based on established catalog or market prices.

[00:43:13] Speaker 01:
Would this fall within that definition?

[00:43:14] Speaker 02:
Well, it doesn't seem like it would.

[00:43:16] Speaker 01:
I'm just kind of throwing it out there.

[00:43:18] Speaker 01:
That's I think a question that the agency considered and it's something that if it'd be one of those fact things we would need to send back all Right.

[00:43:30] Speaker 02:
Okay.

[00:43:31] Speaker 02:
I you know, we've thank you.

[00:43:32] Speaker 02:
Obviously we dug in quite deep to this case and I appreciate your help.

[00:43:35] Speaker 02:
So let me let mr Lescara have his rebuttal time and restore his full six minutes because we certainly went over with the government

[00:43:52] Speaker 04:
Thank you, Your Honor.

[00:43:55] Speaker 04:
The questions that were posed with regard to how 52212-4 could possibly apply, I think, are very appropriate.

[00:44:11] Speaker 04:
We point out in the briefs that the services that were procured here under

[00:44:21] Speaker 04:
don't even come close to constituting commercial items.

[00:44:27] Speaker 04:
There were no items, first of all.

[00:44:30] Speaker 04:
But second of all, there is nothing commercial about teaching government employees government regulations that they will utilize as government contracting officers to procure goods for the government.

[00:44:47] Speaker 04:
And so there weren't any items.

[00:44:49] Speaker 04:
It has nothing to do with commercial.

[00:44:52] Speaker 04:
And it is clear that this all came up after we filed our lawsuit in the court of claims.

[00:45:03] Speaker 04:
And no one had, they had not addressed this at all.

[00:45:11] Speaker 04:
And part of that process,

[00:45:16] Speaker 04:
it was raised and they suggested they were going to file under the Christian doctrine.

[00:45:23] Speaker 04:
But then, and this is all in the record, they claimed that they found this commercial items belatedly, they claimed, during the case.

[00:45:34] Speaker 04:
So there's nothing in our complaint about this because they never even said boo about this clause and the termination for convenience until well after the case was filed.

[00:45:45] Speaker 04:
And we were moving down the road to discovery.

[00:45:49] Speaker 04:
We still had four, five, six months worth of discovery left in the schedule when they raised this and said they were going to file under the Christian doctrine.

[00:45:59] Speaker 04:
And then they came up and said, whoops, we found a termination for convenience clause in the contract.

[00:46:07] Speaker 04:
Everyone agrees, the court below, the government, JKB agrees that you can't

[00:46:15] Speaker 04:
Terminate for convenience unless there is a clause in the contract saying that it is a Well, everyone doesn't agree that that's true the Christian doctrine and the government's arguments to the contrary would Certainly not be consistent with what you just said Your honor a week on page 27 28 of our rebuttal brief

[00:46:43] Speaker 04:
We stayed under the Christian doctrine a contract clause may be read into a contract under circumstances if There was legal requirement that the contract contained such a clause that is your assertion in your Rebuttal you said everyone here agrees that it can't there can't be a clause unless it's in the contract the government does not agree with that

[00:47:06] Speaker 02:
I mean, am I wrong?

[00:47:07] Speaker 02:
Nod yes or no?

[00:47:08] Speaker 02:
No.

[00:47:09] Speaker 02:
The government does not agree with that.

[00:47:10] Speaker 02:
I understood her argument to very clearly be that if we disagree, we should vacate and remain for the lower court to analyze this under Christian.

[00:47:22] Speaker 04:
Understood, Your Honor.

[00:47:26] Speaker 04:
With regard to the existence of

[00:47:34] Speaker 04:
the clause that they rely upon, we also raise the argument that if it's a mutual mistake, then reformation would be appropriate, and we would be entitled to damages.

[00:47:49] Speaker 04:
And here, there's absolutely, in my assessment, based upon what we have presented, there is no way that this clause could be applicable

[00:48:04] Speaker 04:
as a commercial items clause to a services contract.

[00:48:09] Speaker 04:
And even if it were considered a mutual mistake, under the laws we cite in our briefing, that would still entitle us to reformation and damages.

[00:48:22] Speaker 04:
And so this is a situation.

[00:48:26] Speaker 02:
What do we do with the fact that you signed a contract indicating that this clause governed in the contract?

[00:48:32] Speaker 02:
What do we do with that fact?

[00:48:34] Speaker 02:
You signed a contract that was titled order for commercial items And then one of the two far provisions on this page two of the contract They're incorporated by reference one of them is this one which pertains to commercial items I understand all of your arguments about why these are services not items But what do we do with the fact that you had a contract in front of you that very clearly incorporated this particular provision with specificity and

[00:49:01] Speaker 02:
And you signed it saying it applied.

[00:49:03] Speaker 04:
Your Honor, I think it's a fair question.

[00:49:05] Speaker 04:
I do think that, first of all, the contract, they are the drafter of the contract and should be construed against them.

[00:49:14] Speaker 04:
But also, they can't unilaterally rewrite the contract.

[00:49:20] Speaker 02:
They're not rewriting it.

[00:49:21] Speaker 02:
It says what it says, and you signed it.

[00:49:24] Speaker 04:
Right.

[00:49:24] Speaker 04:
But they are, to the extent that they are having

[00:49:29] Speaker 04:
this clause that clearly is limited to application on commercial items applied to services is rewriting the contract.

[00:49:36] Speaker 04:
Because while that contract was in there, I mean, that provision was in the contract when we signed it, it doesn't say that they're entitled to that same relief for services that we provide.

[00:49:50] Speaker 04:
And again, it can be considered a nullity because it's inapplicable.

[00:49:57] Speaker 04:
it just doesn't apply in the contract.

[00:49:59] Speaker 03:
If it applies, there's also a provision that says it has to be done in writing, right?

[00:50:03] Speaker 04:
Yes.

[00:50:06] Speaker 04:
So there are any number of reasons that the decision below in which the judge simply said well there you know it doesn't necessarily indicate that it applies in this situation but there's nothing

[00:50:25] Speaker 04:
here that says it doesn't apply.

[00:50:27] Speaker 04:
And I think there are lots of reasons it doesn't apply as it relates to the application of determination for convenience under the law.

[00:50:37] Speaker 04:
And so we would ask that the summary judgment granted against us be undone and be sent back to the court so that we can finalize the rest of the case or discovery

[00:50:56] Speaker 02:
Okay, I thank both counsels.

[00:50:58] Speaker 02:
This case is taken under submission.