[00:00:00] Speaker 02:
The next case is Williams Building Company versus Secretary of State, 2023-2337.

[00:00:06] Speaker 02:
Good morning, Your Honors.

[00:00:10] Speaker 01:
Good morning, Mr. Cox.

[00:00:12] Speaker 01:
Yes, sir.

[00:00:13] Speaker 01:
May it please the court, Kevin Cox for Williams Building Company.

[00:00:18] Speaker 01:
Your Honors, as you're well aware, this case involves a contract.

[00:00:21] Speaker 01:
It's a contract case, an appeal from the Civilian Board of Contract Appeals for competing summary judgment motions.

[00:00:30] Speaker 01:
denied our motion for partial summary judgment as to modification P20, and granted the government's motion for summary judgment dismissing the breach claim, as I'll refer to it, for procedural reasons and for other quantum issues.

[00:00:50] Speaker 01:
I don't want to belabor the facts too much, but I feel like given the torture timeline, it's important to just highlight a few key moments in time here, if you'd indulge me.

[00:01:01] Speaker 01:
So the solicitation was issued by the Department of State OBO Overseas Building Operations in January of 2015.

[00:01:10] Speaker 02:
But there were two settlements.

[00:01:12] Speaker 02:
Each one involves substantial payments of over a million dollars, and each one had a waiver with the liability.

[00:01:20] Speaker 01:
Yes, Your Honor.

[00:01:21] Speaker 01:
So yeah, so there was a series of modifications, as you referred to them, settlements.

[00:01:26] Speaker 01:
Modification P7 and P8, and then after that, modification P20.

[00:01:32] Speaker 01:
So our argument is, and I can go directly to the language, is that modification P20, if we work backwards,

[00:01:39] Speaker 01:
Modification P-20, if I could direct the court to the appendix, it starts at page 1839.

[00:01:47] Speaker 03:
Do you agree that putting to one side modification P-20, that modification 7 and 8 would be viewed as resolving the cardinal change issue?

[00:01:59] Speaker 01:
No, your honor.

[00:02:00] Speaker 01:
We don't believe that it did.

[00:02:03] Speaker 01:
Modification 7 addressed these new IFC drawings, this increased scope of work.

[00:02:11] Speaker 01:
When the government issued this drawing package, this IFC set, it was, for lack of a better phrase, it was half-faked.

[00:02:17] Speaker 01:
It was a complete mess.

[00:02:19] Speaker 01:
So they worded that in 15, and my client had to spend hundreds and hundreds, almost 1,000 hours, debugging these drawings and cleaning them up.

[00:02:29] Speaker 01:
So they reached a point, finally, when they executed Mod 7, which was in March of 18.

[00:02:34] Speaker 03:
Yeah, but the board said that you didn't include in Count 1 of the complaint any claim for defective specifications based on the newly incorporated specifications in Mod 7 and Mod 8.

[00:02:45] Speaker 01:
Right, so I guess it gets to the issue of the nature of the claim.

[00:02:49] Speaker 01:
The breach claim was a cumulative cardinal change claim.

[00:02:53] Speaker 01:
It wasn't for one specific item of work.

[00:02:56] Speaker 01:
So at the time they executed mods seven and eight and signed those releases, they couldn't possibly have known what was to come in the future.

[00:03:04] Speaker 01:
So seven addressed IFC, the new IFC set, and addressed that increased scope of work.

[00:03:12] Speaker 01:
then paid them for time and money to go double shifts to implement this new scope work.

[00:03:17] Speaker 01:
But neither one of those mods addressed the problems, the inherent problems with the defective specs and all the time that we spent in research and development cleaning this up.

[00:03:25] Speaker 03:
The board said that you didn't include a defective spec claim in respect to the new spec in Count 1 of the complaint.

[00:03:35] Speaker 01:
I respectfully disagree.

[00:03:36] Speaker 01:
And I can refer the board, excuse me, to the court to the complaint.

[00:03:41] Speaker 01:
It's at appendix 116.

[00:03:43] Speaker 01:
Oh, I'm sorry.

[00:03:45] Speaker 01:
Pardon me.

[00:03:46] Speaker 01:
91, it begins.

[00:03:48] Speaker 01:
And we specifically, in the complaint, we specifically address the fact that

[00:04:01] Speaker 03:
Where does the complaint in Part 1 talk about the specifications, the new specifications adopted in Mods 7 and 8 being defective?

[00:04:15] Speaker 01:
Where does it say that?

[00:04:16] Speaker 01:
The appendix, page 115, it talks about the fact that on starting at paragraph 74, on March 6, 2019, Williams amended his claim to include time related to costs.

[00:04:29] Speaker 01:
And it goes on to state.

[00:04:31] Speaker 01:
At 76, on May 9th, 19, we submitted an updated claim with the time-related cost proposal removed there from.

[00:04:39] Speaker 01:
And so those documents are incorporated into the complaint.

[00:04:44] Speaker 01:
That claim, the updated claim.

[00:04:45] Speaker 04:
This is not count one, is it?

[00:04:50] Speaker 04:
This is something under the heading of procedural history.

[00:04:55] Speaker 04:
That's correct.

[00:04:56] Speaker 04:
Count one, as I understand it, ends at page A101.

[00:05:04] Speaker 04:
Count one goes from A-93 to A-101?

[00:05:08] Speaker 01:
That's correct.

[00:05:09] Speaker 01:
I'm just trying to find the page.

[00:05:15] Speaker 01:
Starting on page 100, it talks about how OBO had modified the project so drastically.

[00:05:22] Speaker 01:
The changes represent a cardinal change to the contract.

[00:05:24] Speaker 01:
They breach the implied duty.

[00:05:26] Speaker 01:
So nowhere was it limited to the language of those mods.

[00:05:30] Speaker 01:
And I referred on this issue, on this precise issue that we're talking about.

[00:05:34] Speaker 01:
There was some dissent language from Judge Newman in this court's Amertex decision, where she talked about the fact that you don't know this cardinal change until the end of the contract.

[00:05:46] Speaker 01:
It's a cumulative thing.

[00:05:47] Speaker 01:
You don't know what it is until you've considered all the modifications and all the implications.

[00:05:51] Speaker 03:
Well, what other modifications were there?

[00:05:54] Speaker 03:
after seven and eight that increased the scope of the work.

[00:05:59] Speaker 01:
So there were additional modifications that are not really issued in this case.

[00:06:05] Speaker 01:
But they got through 7 and 8, and we got to mod 20.

[00:06:09] Speaker 01:
By the time they were negotiating this breach, these other outstanding claims.

[00:06:12] Speaker 03:
So the answer is there wasn't any additional work added after 7 and 8?

[00:06:16] Speaker 01:
I don't have all the mods in the record, but from mod 9 through mod 19, there were additional changes that were made.

[00:06:23] Speaker 01:
There was one mod, I believe it was 15.

[00:06:26] Speaker 01:
I may be mistaken.

[00:06:27] Speaker 03:
So the contracts go... Where have you alleged that those later modifications worked a cardinal change?

[00:06:33] Speaker 01:
Where have we alleged that those... We've argued a cumulative cardinal change theory, Your Honor, in the claim which was submitted after mod 7 and 8, which was appealed to the board and which is all part of the appeal.

[00:06:48] Speaker 01:
The appeals of those claims and those claims are part of the record before the board.

[00:06:52] Speaker 01:
It's well laid out in all those claims.

[00:06:55] Speaker 01:
The update in May of 19, which was after, that claim went on and on about these additional time we had to spend cleaning up the specs.

[00:07:04] Speaker 01:
These new IFC drawings, they weren't good either.

[00:07:06] Speaker 01:
We just spent hundreds of hours dealing with those.

[00:07:08] Speaker 01:
Then we had the government come to us and suspend the job.

[00:07:14] Speaker 01:
And so that became part of this cardinal change.

[00:07:17] Speaker 01:
The whole job changed.

[00:07:18] Speaker 01:
The job went from $14 million to over double that, more than $28 million, I think it was.

[00:07:24] Speaker 01:
The scope of the time went from 16 months to nearly triple that.

[00:07:28] Speaker 01:
So the job turned into something.

[00:07:29] Speaker 01:
And then at the end of the job, of course, it was COVID.

[00:07:31] Speaker 01:
But it turned into something that they never anticipated when they bid the job.

[00:07:35] Speaker 01:
And they didn't know the nature of all these changes and this interference until toward the end of the job, when they sat down and negotiated mod 20.

[00:07:47] Speaker 01:
So mod 20, if we look at the language of mod 20, mod 20 acknowledges it's a bilateral modification.

[00:07:54] Speaker 01:
It was negotiated with Williams and the chief of contracting there, Mr. Powell.

[00:07:58] Speaker 01:
Obviously a very experienced man.

[00:08:00] Speaker 01:
They drafted the mod.

[00:08:01] Speaker 01:
And as the mod indicates, they intended to have a global resolution of all outstanding claims.

[00:08:09] Speaker 01:
And the mod specifically says there's three outstanding claims.

[00:08:13] Speaker 01:
There's storage costs, there's this time-related cost proposal, and there's this breach cardinal change claim.

[00:08:19] Speaker 01:
And that's the one that we're here arguing about today.

[00:08:22] Speaker 01:
The mod states this is a, quote unquote, partial settlement of those claims, of those outstanding claims.

[00:08:28] Speaker 03:
I don't understand how Mod 20 recognized that those were viable claims.

[00:08:33] Speaker 03:
They recognized that the claims existed, but it didn't say that they weren't barred by Mods 7 and 8.

[00:08:41] Speaker 01:
Well, respectfully, Your Honor, the way that we read that, the plain language that Mods, at the time it was negotiated, said

[00:08:49] Speaker 01:
We will pay you for this breach claim.

[00:08:52] Speaker 01:
We've read the breach claim.

[00:08:53] Speaker 01:
We've read all these allegations.

[00:08:55] Speaker 03:
We know about Mod 7.

[00:08:56] Speaker 03:
It doesn't say we will pay for the breach claim.

[00:08:59] Speaker 03:
It said we'll ask for our additional authority for settlement.

[00:09:04] Speaker 01:
If I could, can I just turn to the exact language of the mod?

[00:09:08] Speaker 01:
So I don't misquote it.

[00:09:09] Speaker 01:
I appreciate it.

[00:09:13] Speaker 02:
Bill says additional funding to settle the breach of contract claims will be requested when additional funds are available.

[00:09:21] Speaker 01:
That's right.

[00:09:21] Speaker 01:
And our position, Your Honor, plain reading of that modification is that that means that they reached an agreement.

[00:09:27] Speaker 01:
They wanted to, they sat down.

[00:09:28] Speaker 01:
They had intended to have a global resolution.

[00:09:31] Speaker 01:
Our position is that they reached an agreement.

[00:09:33] Speaker 01:
They reached a quantum agreement on the first two claims.

[00:09:35] Speaker 01:
They paid those.

[00:09:36] Speaker 01:
And they said, we don't have the money right now to pay your breach claim.

[00:09:39] Speaker 01:
We've read it.

[00:09:40] Speaker 01:
We know all about it.

[00:09:42] Speaker 01:
We're going to, it says,

[00:09:43] Speaker 01:
Additional funding to settle the breach claim will be requested when the funds are available.

[00:09:47] Speaker 01:
Not if.

[00:09:48] Speaker 01:
You know, it says when.

[00:09:50] Speaker 01:
There's nothing conditional about that language.

[00:09:52] Speaker 02:
What about the release further on in MOA 20?

[00:09:56] Speaker 02:
Contract is released, appendix 769.

[00:09:59] Speaker 02:
769.

[00:10:14] Speaker 02:
ABAP releases the government from any and all liability for further requests.

[00:10:23] Speaker 01:
Yes.

[00:10:23] Speaker 01:
OK.

[00:10:23] Speaker 01:
I'm looking at the release language.

[00:10:25] Speaker 01:
In consideration of the mod agreed to herein, it's a complete equitable adjustment of 4.9.

[00:10:30] Speaker 01:
Release the government from any and all liability for further requests.

[00:10:34] Speaker 01:
Further requests for equitable adjustment demands are attributable to the facts and circumstances set forth in the above-referenced PCOs

[00:10:40] Speaker 01:
referring to one and two immediately preceding that, Your Honor.

[00:10:44] Speaker 01:
One was PCO 67, which dealt with additional storage costs, and two, which was a time extension mod.

[00:10:51] Speaker 01:
So it's referring to those two specific items.

[00:10:54] Speaker 01:
And then it said, we'll deal with the breach when we get the money.

[00:10:57] Speaker 01:
And that's the way... I don't know how else you read that.

[00:11:01] Speaker 04:
Were there multiple issues in this breach of contract claim beyond your

[00:11:08] Speaker 01:
cardinal change here that you resurrected uh... the yesterday on it so that they've done that creates some ambiguity as to what uh... this person could have even been first well uh... we believe yet there were additional items one of which was and i think that's right i put it along history in my brief about the issue was this interference by the department state and uh... if you just adopted from it i'll just quickly go through it uh... would be there would be a state

[00:11:38] Speaker 01:
a communist state-owned subcontractor that we had to hire.

[00:11:42] Speaker 01:
The OBO told us, hire this Washi.

[00:11:44] Speaker 01:
So we hired Washi.

[00:11:46] Speaker 01:
It came to a point there when they weren't working out.

[00:11:48] Speaker 01:
We wanted to get rid of them.

[00:11:49] Speaker 01:
We got somebody else.

[00:11:51] Speaker 01:
The OBO suspended the job.

[00:11:53] Speaker 01:
suspended the project for three months, and then began to secretly negotiate with the state-owned subcontractor, Huaxi, met at the embassy in Beijing, negotiated a dollar amount.

[00:12:06] Speaker 01:
We weren't there.

[00:12:06] Speaker 01:
We weren't part of this meeting.

[00:12:07] Speaker 01:
We didn't know what was going on.

[00:12:08] Speaker 02:
Counsel, you're well into your rebuttal time.

[00:12:10] Speaker 02:
If you want to continue to recite facts, you can, or you can save your time.

[00:12:15] Speaker 01:
I'd prefer to just finish this line.

[00:12:19] Speaker 01:
I appreciate it.

[00:12:20] Speaker 01:
So we had this meeting.

[00:12:22] Speaker 01:
They had this secret meeting.

[00:12:23] Speaker 01:
They came to us and said, we're not giving you the site back until you pay this state-owned subcontractor 800 plus thousand, OK?

[00:12:31] Speaker 01:
Write them the check.

[00:12:32] Speaker 01:
What I found out in discovery during depositions long after

[00:12:36] Speaker 01:
The board had said, here's your statement of cost.

[00:12:39] Speaker 01:
You can't introduce any costs after this.

[00:12:41] Speaker 01:
This was in the beginning of the case.

[00:12:42] Speaker 01:
So in discovery, I learned through this deposition that there was a nexus between these costs that we had to pay and the government's conduct.

[00:12:50] Speaker 01:
The government was the one that told us to pay it.

[00:12:52] Speaker 01:
They didn't verify these materials were there.

[00:12:54] Speaker 01:
They, in fact, were not there.

[00:12:56] Speaker 01:
And then they lifted the suspension as soon as we paid this communist-owned subcontractor.

[00:13:02] Speaker 01:
And I had asked the one gentleman, and I don't recall which one it was, but I said, well, why didn't you invite Williams to these negotiations?

[00:13:09] Speaker 01:
He said, well, we thought they'd get blackmailed by Washi.

[00:13:13] Speaker 01:
Well, we essentially got blackmailed by OBO.

[00:13:17] Speaker 01:
They told us, you've got to pay this amount, or you don't get your site back.

[00:13:20] Speaker 01:
You can't finish your work.

[00:13:22] Speaker 01:
So we were just saying, we had no choice.

[00:13:24] Speaker 01:
But the materials that we paid for weren't there.

[00:13:26] Speaker 01:
So there's the damage on that specific item.

[00:13:30] Speaker 01:
And we were barred from including that in this case, because it came after the statement of cost.

[00:13:37] Speaker 01:
I have a minute 30 to reserve.

[00:13:39] Speaker 01:
So I'll take that number.

[00:13:41] Speaker 01:
Thank you.

[00:13:42] Speaker 02:
We'll give you two minutes.

[00:13:43] Speaker 01:
Thank you, sir.

[00:13:47] Speaker 02:
Mr. Long.

[00:13:48] Speaker 00:
Good morning and may it please the courts two points.

[00:13:51] Speaker 00:
I think maybe three first, the modification seven and eight do address the cardinal changes issue.

[00:13:59] Speaker 00:
Um, there's been a question of whether or not subsequent activity is folded into that.

[00:14:05] Speaker 00:
Um, and I would note that the board has decision found first of all, um, to your honor judge Dice question, I believe that this wasn't raised in the complaint, the post modification.

[00:14:16] Speaker 00:
activity that allegedly amounts to a cardinal change, but also at appendix 20 to 21.

[00:14:21] Speaker 00:
The board additionally concluded that as a factual matter, what might have been included in this breach claim on the cardinal change theory after you exclude the pre-modification 7 and 8 couldn't amount to a cardinal change.

[00:14:36] Speaker 00:
So there's both a conclusion that the modification is effective

[00:14:40] Speaker 00:
and all of the modifications were effective, and also that what was left after you took account of those modifications could not amount to a cardinal change.

[00:14:49] Speaker 00:
Second of all, I think the modification 20 languages is quite clear in our view and that it does not vitiate modifications seven and eight.

[00:15:00] Speaker 00:
I will point out to Judge Chen's question

[00:15:03] Speaker 00:
Yes, there are multiple issues folded into the breach claim that is included in the May 9, 2019, CDA claim.

[00:15:12] Speaker 00:
There's the Cardinal Changes claim, which I just addressed.

[00:15:15] Speaker 00:
There's also an issue about responding to RFIs.

[00:15:18] Speaker 00:
And there's also this Washi subcontractor issue that my friend Mr. Cox was discussing a moment ago.

[00:15:24] Speaker 00:
And so we see that if we're looking at that language that says additional settlement funds will be requested that it's not at all clear that that's referring that that's some sort of I think unambiguously it is not a commitment to settle or a settlement but it also as a factual matter at that point there were multiple sort of elements of this breach claim floating around and it's not at all clear from that language what if anything or how that's being parsed out by

[00:15:52] Speaker 00:
the parties in the context of that.

[00:15:54] Speaker 04:
It is contemplating something, though.

[00:15:56] Speaker 04:
I mean, we can't reduce it down to rubble.

[00:15:59] Speaker 04:
The statement has some kind of intention behind it.

[00:16:02] Speaker 00:
I agree it has some intention, Your Honor.

[00:16:04] Speaker 00:
I think that's right.

[00:16:05] Speaker 00:
It's a commitment.

[00:16:06] Speaker 00:
Additional funding will be requested with respect to the third claim.

[00:16:10] Speaker 04:
So there's some contemplation that Williams is entitled to something.

[00:16:17] Speaker 04:
relates to their claim.

[00:16:19] Speaker 00:
Isn't that correct?

[00:16:19] Speaker 00:
I think that there's an expression there potentially by the contracting officer of that view.

[00:16:25] Speaker 00:
But I don't think that that then vitiates, to use the word again, the effects of Modification 7 and 8.

[00:16:33] Speaker 00:
So whatever may be contemplated by that language, it doesn't indicate a waiver of parties prior agreement and payment in relation to Mod 7 and 8.

[00:16:43] Speaker 03:
I mean, claims are settled all the time, even though if you

[00:16:46] Speaker 03:
believe that the claims don't have any merit, their litigation costs or whatever.

[00:16:52] Speaker 03:
I don't see that the effort, the contemplation to try to settle a claim is a concession that the claim has any merit.

[00:17:01] Speaker 00:
We of course agree, Your Honor, yes.

[00:17:03] Speaker 00:
And then just

[00:17:05] Speaker 00:
So I think toward the end of my friend Mr. Cox's argument, he suggested that the State Department had blackmailed WBC.

[00:17:12] Speaker 00:
And I just want to, first of all, of course, note that we don't agree that that's what occurred, but also point out that the board denied State Department summary judgment on the issue of this subcontractor relationship and rather found that WBC Williams had been unable to prove damages.

[00:17:33] Speaker 00:
First of all, I don't believe this record supports any suggestion of blackmail.

[00:17:37] Speaker 00:
Second of all, that wasn't the basis for the board's grants of summary judgment on that specific issue.

[00:17:45] Speaker 00:
And if there are no further questions, we ask that you affirm.

[00:17:47] Speaker 00:
Thank you.

[00:17:49] Speaker 02:
Thank you, counsel.

[00:17:50] Speaker 02:
Mr. Cox?

[00:17:52] Speaker 00:
I don't have anything to add.

[00:17:54] Speaker 02:
All right.

[00:17:55] Speaker 02:
Case is submitted.

[00:17:56] Speaker 02:
Thank you to both counsels.