               ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeal of --                                )
                                            )
Safeco Insurance Company of America         )      ASBCA No. 60952
                                            )
Under Contract No. W912HN-08-D-0042         )

APPEARANCES FOR THE APPELLANT:                     John S. Vento, Esq.
                                                    Trenam Law
                                                    Tampa, FL

                                                   Brett D. Divers, Esq.
                                                    Mills Paskert Divers
                                                    Tampa, FL

APPEARANCES FOR THE GOVERNMENT:                    Thomas H. Gourlay, Jr., Esq.
                                                    Engineer Chief Trial Attorney
                                                   A. L. Faustino, Esq.
                                                   Robert W. Scharf, Esq.
                                                    Engineer Trial Attorneys
                                                    U.S. Army Engineer District, Sacramento

        OPINION BY ADMINISTRATIVE JUDGE CLARKE ON THE
    GOVERNMENT'S MOTION TO DISMISS FOR LACK OF JURISDICTION

        The U.S. Army Corps of Engineers (COE) moves for dismissal due to lack of
jurisdiction. The COE asserts that Safeco Insurance Company of America (Safeco) did
not have a contract with the government and therefore the Board lacks jurisdiction
under the Contract Disputes Act, 41 U.S.C. §§ 7101-7109 (CDA). Safeco argues that
the Board has jurisdiction over its equitable subrogation claim and an implied-in-fact
contract based on the contracting officer's final decision (COFD), an escrow
agreement, a modification directing payments into the escrow account, payments into
the escrow account, and other matters. We grant the COE's motion.

    STATEMENT OF FACTS (SOF) FOR THE PURPOSES OF THE MOTION

       1. Task Order No. CMOl under Contract No. W912HN-08-D-0042 was issued to
LL. Fleming, Inc. (Fleming) on 26 April 2010 for the design and construction of a
Brigade/Battalion Headquarters at Fort Polk, Louisiana (R4, tab 3). Safeco issued a
Payment Bond (R4, tab 6) and a Performance Bond (R4, tab 7) as surety for the contract.
       2. Fleming, Engineering Design Technologies, Inc. (EDT), PBS&J
Constructors, Inc. (PBS&J), and U.S. Bank National Association, escrow agent,
entered into an Escrow Agreement as of 17 February 2011 (app. supp. R4, tab 1).
Pursuant to this agreement Fleming agreed to direct the COE to deposit all payments
made to Fleming into the escrow account (id. at 1).

      3. By letter dated 16 June 2011 to Ms. Grant, COE contracting officer (CO),
Safeco's attorneys, Mills Paskert Divers (MPD), inquired as follows:

                      It is Safeco' s understanding that an escrow account
               has been established with U.S. Bank for all contract
               [W912HN-08-D-0042] proceeds and that the USACE is
               making payments of all contract proceeds due to Fleming
               into that account. If this understanding is incorrect, please
               let me know in writing at your earliest opportunity since it
               is Safeco's expectation that the· USACE is paying all
               contract proceeds into the U.S. Bank escrow account.

(R4, tab 9)

       4. By letter dated 13 July 2011 to CO Dones, COE, MPD inquired as follows:

                      As you know from my prior communications, it is
               Safeco' s understanding that all payments due on the
               above-referenced contract [W912HN-08-D-0042] were to
               be paid into an escrow account with U.S. Bank. Safeco
               has reason to believe that funds may no longer be going to
               such escrow account. Please inform Safeco of the bank
               account into which contract funds for this Project are
               currently being directed and an approximate date for the
               next payment. In addition, Safeco requests that the Corps
               not release any funds to Fleming without Safeco's written
               consent. Please direct such requests for Safeco's consent
               to my attention.

(R4, tab 10)

      5. On 18 July 2011, Mr. Vento, PBS&J's attorney, sent an email to
Mr. Henson, COE, with a copy to CO Dones, expressing concern that subcontractors




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would not be paid ifthe COE did not change the CAGE 1 code to insure payments went
to U.S. Bank escrow (R4, tab 24 at 2).

        6. By letter dated 22 July 2011 to Mr. Henson, MPD wrote:

                       As stated in my letter to the Contracting Officer,
               Ms. Dones, on July 13, 2011, it is the understanding of
               Safeco that all payments due on the above-referenced
               contract were to be paid into an escrow account with U.S.
               Bank, CAGE code 6CN69. All funds must be paid into
               this escrow account with this CAGE code to ensure proper
               payment of the contract proceeds.

(R4, tab 13 at 1)

       7. Unilateral Modification No. 04, dated 22 July 2011, was signed by
CO Dones (R4, tab 12). The modification stated, "The purpose of this modification is
to update the contractor's CAGE code from 1UV34 to 6CN69 per Escrow Agreement
dated 17 February 2011" (id. at 1).

       8. Beginning on 23 August 2011 through 8 August 2014, the COE made 15
payments to the U.S. Bank escrow account, CAGE Code 6CN69 (R4, tab 17). The
project was completed on 11 July 2012 (R4, tab 26 at 3).

       9. On 13 August 2014 a payment of $56,073.84 was returned to the COE
because of an "Invalid bank account number" (R4, tab 19). By email dated 15 August
2014 to "ilflem@aol.com," Ms. Vaughan, COE Finance Center, stated that a payment
of $58,500.00 was returned to the Finance Center because CAGE Code 6CN69 had
expired (R4, tab 20). In her final decision CO Meares explained that the $56,073.84
was an offset of $2,426.16 from the $58,500.00 (R4, tab 26 at 4, ir 28).

       10. The record includes a "DIRECT DEPOSIT AUTHORIZATION" form
dated 2 September 2014 that references Cage Code 6CN69 and Fleming that
authorizes deposit in a checking account at Georgia Coastal Federal Credit Union,
Brunswick, Georgia (R4, tab 21 ). In her final decision CO Meares states that the form
was signed by Fleming (R4, tab 26 at 4, ii 27).




1 The   CAGE Code is the "Commercial and Government Entity" code, a unique
         identifier assigned to suppliers of defense agencies as well as government
         agencies themselves. FAR 4. l 80l(a).

                                             3
       11. On 14 September 2014 the COE made payment to Fleming in the amount
of $56,073.84 (R4, tab 26 at 4, ,-i 28; app. mot. at 4). The history behind this payment
was explained in an email dated 30 October 2015 from CO Yarbro to Mr. Vento:

              3. Payment of $56,073.84 (offset $2,426.15; original
              amount $58,500.00) was processed on 8 August 2014 by
              EFT to US Bank to account ending in 7365. This payment
              was returned to the USACE Finance Center due to a closed
              account. The CAGE code 6CN69 was expired in SAM
              (System for Award Management). On 15 August 2014 an
              email was sent to IL Fleming from the USACE Finance
              Center stating that this payment was returned to the
              Finance Center due to a closed account. In the same email,
              the USACE Finance Center provided Mr. Fleming a Direct
              Deposit form and requested he update SAM with current
              payment information. On 2 September 2014 a Direct
              Deposit Authorization UFC Form 23 (attached) was
              submitted by I.L. Fleming to the USACE Finance Center
              changing the bank account to Georgia Coastal Federal
              Credit Union account number ending in 1132. The final
              EFT payment in the amount of $56,073.84 (offset
              $2,426.15; original amount $58,500.00) was made to
              IL Fleming to the Georgia Coastal Federal Credit Union on
              Sept 12, 2014 to acct ending in 1132.

(R4, tab 23 at 1)

      12. By email dated 2 November 2015 to Mr. Heath, COE Finance Center,
Mr. Vento stated:

              [I]f I read this correctly, the Corps made an improper
              payment of $56,000 to IL Fleming on 2 Sept 2014 after the
              Corps received a Hold Funds Letter from SAFECO on
              13 July 2011 (attached) advising that no further funds
              should be paid to IL Fleming to ensure that subcontractors
              on the project would be properly paid.

(R4, tab 24 at I)

       13. On 23 August 2016 Safeco filed a certified claim in the amount of
$57,073.84 which was the sum of the $56,073.84 and $1,000.00 contract balance (R4,
tab 25). On 8 December 2016 CO Meares denied Safeco's claim. The decision
included a notice of appeal procedure that referred to the CDA. (R4, tab 26)


                                            4
        14. On 20 December 2016 Safeco filed a notice of appeal with the Board
requesting that it be processed under Board Rule 12.3 accelerated procedure. On
22 December 2016 the Board docketed the appeal under Rule 12.3 as ASBCA
No. 60952. On 28 February 2017 the government filed a motion to dismiss for lack of
jurisdiction. On 7 March 2017 Safeco withdrew its Rule 12.3 election in order to have
the jurisdictional issue resolved.

                                        DECISION

        Safeco characterizes its cause of action in its complaint as being equitable
subrogation (see compl.). As the government correctly argues (see gov't hr. 3-4), we
do not possess jurisdiction over equitable subrogation claims because our jurisdiction
stems from the CDA, which requires a contract between the appellant and the United
States. United Pacific Insurance Co., 380 F.3d 1352, 1355 (Fed. Cir. 2004); see also
Fireman's Fund Insurance Co. v. United States, 909 F.2d 495 (Fed. Cir. 1990) (before
the execution of a takeover agreement, 2 a surety is not a contractor with the United
States); Thorington Electrical and Construction Co., ASBCA No. 56895 et al., 10-2
BCA if 34,511 at 170,177. While Safeco cites law from the Court of Federal Claims
and the Court of Appeals for the Federal Circuit in support of its theory that we
possess such jurisdiction (app. opp'n at 6), the cases cited by Safeco are founded upon
the Court of Federal Claims's grant of jurisdiction through the Tucker Act, see
Insurance Company of the West, 243 F.3d 1367, 1374-75 (Fed. Cir. 2001), which is
specific to that forum, and not applicable to this Board. See 28 U.S.C. § 1491.

        In its response to the government's motion to dismiss, Safeco appears to
secondarily allege that its equitable subrogation theory should be read as an allegation
that it possessed an implied-in-fact contract with the government - a contract over
which we would possess jurisdiction (app. opp 'n at 10-11 ). We are unpersuaded by this
strained re-formulation of Safeco's position. First, no allegation of an implied-in-fact
contract may be found in either Safeco's complaint or in its claim to the contracting
officer upon which this appeal is premised (see gov't br., attach. 1). It thus has no
implied-in-fact contract cause of action before us (not being found in the complaint),
nor could it, because the necessary operative facts alleging an implied-in-fact contract
were not contained within its claim. See Scott Timber Co. v. United States, 333 F.2d
 1358, 1365 (Fed. Cir. 2003); Trepte Construction Co., ASBCA No. 38555, 90-1 BCA
if 22,595 at 113,385-86.
      In the event that we, nevertheless, permitted Safeco to proceed under its
newly-advanced implied-in-fact contract theory, we would still dismiss this appeal for

2   There is no allegation that the United States and Safeco ever entered into a takeover
         agreement in this matter.

                                              5
Safeco's failure to make a non-frivolous allegation of the existence of the implied-in-fact
contract.

        It is well established that Safeco bears the burden of establishing the Board's
jurisdiction by a preponderance of the evidence. Total Procurement Service, Inc.,
ASBCA No. 53258, 01-2 BCA ,-i 31,436 at 155,237. However, this burden is met if
Safeco makes "non-frivolous" allegations of an offer, acceptance, consideration and
contracting authority. Leviathan Corp., ASBCA No. 58659, 16-1 BCA ,-i 36,372
at 177,294. Safeco need not prove the existence of a contract, which is a merits
determination. Id. From this precedent we gather that an appellant must present at
least some plausible evidence of a contract to satisfy both the "preponderance of the
evidence" standard and the "non-frivolous" allegation standard.

       An implied-in-fact contract has all the requirements of an express contract
except that the evidence of the meeting of the minds differs. Hanlin v. United States,
316 F.3d 1325, 1328 (Fed. Cir. 2003). Thus:

                     To establish an implied-in-fact contract with the
              government, appellant must show mutuality of intent to
              contract, consideration, lack of ambiguity in offer and
              acceptance, and that the government representative whose
              conduct is relied upon had actual authority to bind the
              government in contract. City ofEl Centro v. United States,
              922 F.2d 816, 820 (Fed. Cir. 1990), cert. denied, 501 U.S.
              1230 (1991).

Todd Pacific Shipyards Corp., ASBCA No. 55126, 08-2 BCA ,-i 33,891 at 167,755. We
do not agree with Safeco's belief that an implied-in-fact contract may simply be
"inferred from the government's conduct" here (app. opp'n at 10). We have held that a
contract's requirement for payment and performance bonds does not imply a contract
between the government and the bondsman. Fireman's Fund, 909 F.2d at 500. Safeco
does not limit its implied-in-fact contract argument to payment and performance bonds.

       The actions that Safeco alleges made such a contract are as follows:

              [P]ursuant to Safeco's demand, [conveyed by the
              contractor actually doing business with the government,
              Fleming (app. opp'n at 2)] the COE executed a Contract
              Modification that referenced Safeco's Escrow Agreement
              and promised to make payments to the Escrow




                                             6
                Account...the COE ... made fourteen (14 )£31 consecutive
                payments over a span of two (2) years to the Escrow
                Account established by Safeco to protect the Project
                funds .. .in reliance on payments made to the Escrow
                Account, the subcontractors completed their work on the
                Project.

(App. opp'n at 11) For the purpose of deciding this motion, we assume that each of
these allegations is true.

        The key determination, therefore, is if these itemized factual allegations amount
to a "non-frivolous" allegation of an implied-in-fact contract. To reach our decision
we look at other decisions involving similar jurisdictional motions. In Tech Projects,
LLC, ASBCA No. 58789, 15-1 BCA ii 35,940, we denied a motion to dismiss for lack
of jurisdiction because the contracting officer's final decision agreed that there was an
implied-in-fact contract. Id. at 175,661. In Black Tiger Co., ASBCA No. 59819, 16-1
BCA ii 36,423, we denied a government motion to dismiss for lack of jurisdiction
because the "notice of appeal included (1) a contract number; (2) an SF 1449 that
identified appellant on the first page of the contract as the contractor; and (3) a
document appellant asserted was an invoice for the equipment provided under the
contract." Id. at 177,570. In Leviathan Corp., 16-1 BCA ii 36,372, we denied a
motion to dismiss for lack of jurisdiction because of a contract modification that
offered settlement "on behalf of the U.S. Government" and included a release of
claims. Id. at 177,294. We concluded that in each of these cases appellant had made a
"non-frivolous" allegation that a contract existed between it and the government.
However, in each case there were facts that indicated a contract existed. We do not
see any similarities between these cases and the facts alleged by Safeco. Some of the
problems we have are that the COE was not a party to the escrow agreement,
Modification No. 04 was unilateral, payment into the escrow account does not imply
an intent to enter into a contract, and reliance by subcontractors likewise does not
indicate an intent to enter into a contract. The facts itemized above do not relate in any
way to any of the elements of an implied-in-fact contract, i.e., mutuality of intent to
contract, lack of ambiguity in offer and acceptance, consideration, and that the
government representative whose conduct is relied upon had actual authority to bind
the government in contract. Safeco has not made a "non-frivolous" allegation that an
implied-in-fact contract existed between it and the COE.




3   The evidence is that there were, in fact 15 such payments (see SOF ii 8), but this
         distinction is not material.

                                              7
                                   CONCLUSION

       The Board lacks jurisdiction over Safeco's appeal. The COE's motion is
granted and the appeal is dismissed without prejudice for lack of jurisdiction.

      Dated: 25 July 2017




                                                 Administrati e Judge
                                                 Armed Services Board
                                                 of Contract Appeals


 I concur                                        I concur



'~
 RICHARD SHACKLEFORD                             J.~
 Administrative Judge                            Administrative Judge
 Acting Chairman                                 Acting Vice Chairman
 Armed Services Board                            Armed Services Board
 of Contract Appeals                             of Contract Appeals


       I certify that the foregoing is a true copy of the Opinion and Decision of the
Armed Services Board of Contract Appeals in ASBCA No. 60952, Appeal of Safeco
Insurance Company of America, rendered in conformance with the Board's Charter.

       Dated:



                                                 JEFFREY D. GARDIN
                                                 Recorder, Armed Services
                                                 Board of Contract Appeals




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