CBCA 5116

DISMISSED IN PART FOR LACK OF JURISDICTION; DENIED IN PART: December 8, 2017 CBCA 5116 VSE CORPORATION, Appellant, v. DEPARTMENT OF JUSTICE, Respondent. David I. Bledsoe and Jason P. Matechak, Alexandria, VA, counsel for Appellant. Hilary L. Martinson and J. Todd Casey, Office of Chief Counsel, Bureau of Alcohol, Tobacco, Firearms and Explosives, Department of Justice, Washington, DC, counsel for Respondent. Before Board Judges SHERIDAN, ZISCHKAU, and LESTER. LESTER, Board Judge. Appellant, VSE Corporation (VSE), has challenged a contracting officer’s decision denying its request for an equitable adjustment to cover costs of extended storage of fireworks under a contract with respondent, the Department of Justice (DOJ) (acting through the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF)). Initially, VSE argued that ATF constructively changed its contract by requiring the extended storage, with damages running from the date that VSE started performance under its contract. In CBCA 5116 2 response, ATF filed a motion requesting summary relief in its favor on VSE’s claim. VSE then filed an amended complaint adding two new counts – a breach of the duty of good faith and fair dealing claim and a superior knowledge withholding claim – and a new commercial impracticability legal theory to its constructive change count, after which the parties filed supplemental briefs. For the reasons set forth below, we dismiss VSE’s appeal in part for lack of jurisdiction and otherwise grant summary relief to ATF. Statement of Uncontested Facts I. VSE’s Original Contract In 2006, the Department of the Treasury (Treasury) awarded contract TOS-06-052 (Treasury contract) to VSE, through which VSE was to provide nationwide services involving the transportation, storage, management, and disposition of seized or forfeited property for several federal agencies, including ATF. Respondent’s Statement of Uncontested Facts (RSUF) ¶ 2. In the course of criminal investigations, ATF sometimes seizes property for forfeiture and evidentiary purposes, property that must be stored at least until ATF obtains authorization through legal proceedings to dispose of it. Appeal File, Exhibit 1 at 154-55.1 Under the contract, storage services were paid on a cost-reimbursement basis, with costs calculated each month based upon the “per pound” weight of seized property stored. In July 2007, VSE took possession of what was known as the “Covington seizure,” which was being stored in bunkers at a facility owned by Heritage Disposal & Storage, L.L.C. (Heritage) in Alda, Nebraska. RSUF ¶¶ 3-4. The Covington seizure included more than 800,000 pounds of 1.3G and 1.4G fireworks2 that were seized in what became part of a criminal action in the United States District Court for the Eastern District of Kentucky, docket number 08-CR-00056, against Sam Droganes, the original owner of the fireworks. Id. ¶ 3. Heritage initially charged VSE $0.10 per pound per month for storage of the Covington seizure, costs that VSE billed through to the Government under its cost- reimbursement contract. 1 Unless otherwise noted, all exhibits referenced in this decision are found in the appeal file. 2 1.3G explosives, formerly known as Class B special fireworks, are display fireworks that are designed to produce visible or audible effects for entertainment purposes by combustion, deflagration, or detonation, while 1.4G explosives, formerly known as Class C common fireworks, are consumer fireworks (such as firecrackers) intended for use by the general public. See http://www.americanpyro.com/glossary-of-pyrotechnic-terms. CBCA 5116 3 Although Mr. Droganes was in the business of selling 1.4G fireworks, he had no license to sell 1.3G fireworks. Early testing showed that at least some fireworks that were identified as 1.4G fireworks were, in fact, 1.3G fireworks. On July 10, 2008, Mr. Droganes was indicted in the district court for the Eastern District of Kentucky for engaging in the business of importing, manufacturing, transporting, and distributing explosive material without an ATF license. The indictment contained a count seeking forfeiture of various fireworks. On October 7, 2008, Mr. Droganes filed a motion for return of the legal 1.4G fireworks that ATF had seized.