B-123212, JULY 13, 1955, 35 COMP. GEN. 14

B-123212: Jul 13, 1955

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

CLAIMS - RELEASES - EFFECTIVE DATE A COST-PLUS-A-FIXED-FEE CONTRACTOR WHO WAS REQUIRED UPON FINAL SETTLEMENT TO EXECUTE A RELEASE OF ALL CLAIMS AGAINST THE UNITED STATES. OF SETTLING A CLAIM NOT KNOWN TO HIM AT THE TIME THE RELEASE SHOULD HAVE BEEN EXECUTED. EVEN THOUGH HE KNEW OF SUCH CLAIM WHEN THE PREDATED RELEASE WAS SIGNED. 1955: REFERENCE IS MADE TO YOUR LETTER OF MARCH 10. PAYMENT IS SOUGHT BY HADDOCK-1ENGINEERS UNDER COST-PLUS-A-FIXED-FEE CONTRACT NO. INCLUDING JUDGMENTS AND COURT COSTS * * * AND REASONABLE ATTORNEYS' FEES FOR PRIVATE COUNSEL * * * SHALL BE ALLOWABLE UNDER THIS CONTRACT. * * * SUIT WAS INSTITUTED AGAINST THE CONTRACTOR BY WELLS CARGO. 667.21 WAS SETTLED BY PAYMENT OF $1.

B-123212, JULY 13, 1955, 35 COMP. GEN. 14

CLAIMS - RELEASES - EFFECTIVE DATE A COST-PLUS-A-FIXED-FEE CONTRACTOR WHO WAS REQUIRED UPON FINAL SETTLEMENT TO EXECUTE A RELEASE OF ALL CLAIMS AGAINST THE UNITED STATES, EXCEPT THIRD PARTY LIABILITY CLAIMS NOT KNOWN TO HIM ON THE RELEASE DATE, BUT WHO NEGLECTED TO SIGN THE RELEASE UNTIL SOME MONTHS AFTER FINAL PAYMENT, MAY BE REIMBURSED THE COSTS, INCLUDING REASONABLE ATTORNEYS' FEES, OF SETTLING A CLAIM NOT KNOWN TO HIM AT THE TIME THE RELEASE SHOULD HAVE BEEN EXECUTED, EVEN THOUGH HE KNEW OF SUCH CLAIM WHEN THE PREDATED RELEASE WAS SIGNED.

TO V. ZACHMAN, ATOMIC ENERGY COMMISSION, JULY 13, 1955:

REFERENCE IS MADE TO YOUR LETTER OF MARCH 10, 1955, REQUESTING DECISION WHETHER YOU MAY CERTIFY FOR PAYMENT A VOUCHER STATED IN FAVOR OF HADDOCK- 1ENGINEERS, LIMITED AND ASSOCIATES IV, IN THE AMOUNT OF $2,332.27. THE VOUCHER COVERS THE AMOUNT OF A SETTLEMENT AND LEGAL EXPENSES INCURRED BY THE CONTRACTOR IN CONNECTION WITH A LAWSUIT INSTITUTED AGAINST IT BY ONE OF ITS SUBCONTRACTORS.

PAYMENT IS SOUGHT BY HADDOCK-1ENGINEERS UNDER COST-PLUS-A-FIXED-FEE CONTRACT NO. AT (29-1/-1230, ARTICLE III, PARAGRAPH 3, OF WHICH LISTS THE FOLLOWING AS ALLOWABLE COST ITEMS:

(I) LOSSES OR EXPENSES NOT COMPENSATED BY INSURANCE OR OTHERWISE (INCLUDING SETTLEMENTS MADE WITH THE WRITTEN CONSENT OF THE COMMISSION) ACTUALLY SUSTAINED BY THE CONTRACTOR IN CONNECTION WITH THE WORK AND FOUND AND CERTIFIED BY THE COMMISSION TO BE JUST AND REASONABLE * * *.

(P) * * * LITIGATION IN CONNECTION WITH CLAIMS OF THIRD PARTIES * * * THE COST THEREOF, INCLUDING JUDGMENTS AND COURT COSTS * * * AND REASONABLE ATTORNEYS' FEES FOR PRIVATE COUNSEL * * * SHALL BE ALLOWABLE UNDER THIS CONTRACT. * * *

SUIT WAS INSTITUTED AGAINST THE CONTRACTOR BY WELLS CARGO, INC., A SUBCONTRACTOR WHOSE EQUIPMENT HAD BEEN DAMAGED WHILE RENTED TO THE CONTRACTOR. WITH THE CONSENT OF THE COMMISSION, THE SUIT FOR $3,667.21 WAS SETTLED BY PAYMENT OF $1,250 BY THE CONTRACTOR. THE BALANCE OF $1,082.27 COVERED BY THE VOUCHER SUBMITTED REPRESENTS FEES FOR LEGAL SERVICES. THERE WOULD BE NO QUESTION AS TO THE ALLOWABILITY OF THE SETTLEMENT COST AND LEGAL EXPENSES IN A REASONABLE AMOUNT BUT FOR THE FACT THAT THE CONTRACTOR SIGNED A RELEASE OF CLAIMS AGAINST THE GOVERNMENT.

THE CIRCUMSTANCES UNDER WHICH THE RELEASE WAS SIGNED ARE AS FOLLOWS: ARTICLE IV, PARAGRAPH 2, OF THE CONTRACT REQUIRED THE CONTRACTOR TO EXECUTE A RELEASE AS A CONDITION OF FINAL SETTLEMENT. FINAL PAYMENT WAS MADE TO THE CONTRACTOR ON JULY 17, 1953, WITHOUT A RELEASE. THE CONTRACTOR NOTIFIED THE COMMISSION OF THE SUIT BY WELLS CARGO IN A LETTER DATED OCTOBER 2, 1953, AT WHICH TIME IT WAS DISCOVERED THAT THE CONTRACTOR HAD NOT EXECUTED THE RELEASE WHICH HAD BEEN SENT TO IT IN AUGUST 1952. APPEARS FROM THE DOCUMENTS SUBMITTED WITH YOUR LETTER THAT MR. CARLSON, AN AEC AUDITOR, DISCUSSED THE RELEASE BY TELEPHONE WITH MR. YOUNG, A REPRESENTATIVE OF THE CONTRACTOR; THAT MR. YOUNG FOUND THE UNSIGNED RELEASE DATED AUGUST 26, 1952; THAT THE RELEASE EXCEPTED FROM ITS OPERATION ANY THIRD PARTY LIABILITY CLAIMS NOT KNOWN TO THE CONTRACTOR AT THE TIME OF FURNISHING THE RELEASE; THAT MR. YOUNG AND MR. CARLSON DISCUSSED THE QUESTION WHETHER THE WELLS CARGO CLAIM SHOULD BE EXCEPTED IN THE RELEASE AND AGREED THAT IT NEED NOT BE IF THE CLAIM WAS NOT KNOWN TO THE CONTRACTOR ON AUGUST 26, 1952; THAT THE CONTRACTOR'S FILES HAD BEEN TURNED OVER TO THE COMMISSION SO THAT MR. YOUNG COULD NOT BE SURE WHEN THE CONTRACTOR FIRST KNEW OF THE WELLS CARGO CLAIM; THAT THE RELEASE WAS SIGNED BY MR. YOUNG ON OCTOBER 20, 1953, WITHOUT SPECIFICALLY EXCEPTING THE WELLS CARGO CLAIM ON THE ASSUMPTION THAT THE CLAIM WAS NOT KNOWN TO THE CONTRACTOR ON AUGUST 26, 1952. LETTERS OF THE CONTRACTOR THEN IN THE POSSESSION OF THE COMMISSION SHOW THAT THE WELLS CARGO CLAIM WAS KNOWN TO THE CONTRACTOR AS EARLY AS APRIL 1952.

THE FOREGOING CIRCUMSTANCES DEMONSTRATE CONCLUSIVELY THAT THE WELLS CARGO CLAIM WAS KNOWN BY BOTH PARTIES TO BE PENDING AT THE TIME THE RELEASE WAS SIGNED. IT IS ALSO CLEAR THAT THE MAIN REASON WHY THE PREDATED RELEASE WAS NOT REWRITTEN TO EXCEPT THAT CLAIM WAS THE UNDERSTANDING BETWEEN MR. YOUNG AND MR. CARLSON THAT THIS WOULD BE UNNECESSARY IF THE CLAIM WAS NOT KNOWN ON AUGUST 26, 1952. IT SEEMS POSSIBLE THAT THE CONTRACT REQUIREMENT FOR EXECUTION OF A RELEASE BEFORE FINAL SETTLEMENT MAY ALSO HAVE HAD SOMETHING TO DO WITH LEAVING THE 1952 DATE ON THE RELEASE UNCHANGED. ANY EVENT, THE RECORD SHOWS THAT MR. CARLSON KNEW THAT MR. YOUNG DID NOT INTEND TO RELEASE THE WELLS CARGO CLAIM BY SIGNING THE RELEASE. IT MIGHT BE ARGUED, THEREFORE, THAT THE RELEASE AS WRITTEN FAILED TO EXPRESS THE MUTUAL UNDERSTANDING OF THE PARTIES. ALSO, SINCE FINAL PAYMENT HAD THERETOFORE BEEN MADE TO THE CONTRACTOR, A RELEASE OF THE WELLS CARGO CLAIM ON OCTOBER 20, 1953, MIGHT BE HELD INEFFECTIVE FOR LACK OF CONSIDERATION.

IN VIEW OF ALL THE FACTS IN THE MATTER, YOU ARE ADVISED THAT CERTIFICATION AND PAYMENT OF THE VOUCHER SUBMITTED IS NOT PRECLUDED BY THE RELEASE. HOWEVER, IT IS SUGGESTED THAT THE REASONABLENESS OF THE FEES FOR LEGAL SERVICES BE REEXAMINED. THE WELLS CARGO CLAIM WAS FOR $3,667.21, OF WHICH $750 WAS BORNE BY WELLS CARGO, LEAVING A BALANCE OF $2,917.21 PRESUMABLY PAYABLE BY THE CONTRACTOR. THE SETTLEMENT OF $2,000 AND LEGAL FEES OF $1,082.27 TOTAL $3,082.27. SUIT WAS FILED IN NEVADA, AND LOCAL COUNSEL THERE HAVE CHARGED ONLY $125 FOR REVIEW OF THE PLEADINGS, PREPARATION OF AN ANSWER, SETTLEMENT NEGOTIATIONS, AND PREPARATION OF A STIPULATION FOR DISMISSAL OF THE SUIT. IN VIEW OF THE WORK DONE BY THE ATTORNEYS IN THE STATE WHERE WELLS CARGO AND THE OTHER CLAIMANT PARTY WERE LOCATED AND WHERE SUIT WAS BROUGHT, THE QUESTION SUGGESTS ITSELF WHETHER SUCH OTHER WORK ON THE CASE AS MAY HAVE BEEN DONE BY COUNSEL IN CALIFORNIA IS REASONABLY WORTH THE CHARGE OF $930.