B-153497, MAY 6, 1964

B-153497: May 6, 1964

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WAGNER AND DODD: FURTHER REFERENCE IS MADE TO YOUR LETTER OF FEBRUARY 17. IT IS STATED: "WE CONTEND THAT THE NAVY-GRIMES RELATIONSHIP ESTABLISHED EARLY AND CONTINUED WITHOUT CHANGE OVER A PERIOD OF MANY YEARS GAVE RISE TO A CONTRACT IMPLIED IN FACT. IS TO BE TREATED AS OTHER CONTRACTORS UNDER ANALOGOUS SITUATIONS. THE GENERAL LAW PERTAINING TO CONTRACTS IMPLIED IN FACT HAS BEEN SUMMARIZED THUS: "ANY CONDUCT OF ONE PARTY FROM WHICH THE OTHER PARTY MAY REASONABLY DRAW THE INFERENCE OF A PROMISE IS EFFECTIVE IN LAW AS SUCH. CONDUCT OF THE PARTIES IS TO BE VIEWED AS A REASONABLE MAN WOULD VIEW IT TO DETERMINE THE EXISTENCE OR NOT OF AN IMPLIED IN FACT CONTRACT.' 17 CJS. THE REASONING IS VERY CLOSE TO THAT OF A PROMISSORY ESTOPPEL: IF ONE PARTY GAVE THE OTHER REASON TO BELIEVE A PROMISE HAD BEEN MADE.

B-153497, MAY 6, 1964

TO BRAND, WAGNER AND DODD:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF FEBRUARY 17, 1964, AND OTHER CORRESPONDENCE PROTECTING ON BEHALF OF THE GRIMES MANUFACTURING COMPANY OF URBANA, OHIO, THE POSSIBLE AWARD OF A CONTRACT UNDER INVITATION FOR BIDS NO. 383-138-64. YOU STATE THAT ANY AWARD MADE PURSUANT TO THE ABOVE INVITATION WOULD BE IMPROPER FOR THE REASON THAT GRIMES ALLEGEDLY HAD A PROPRIETARY INTEREST IN THE DRAWINGS MADE AVAILABLE BY THE NAVY IN CONJUNCTION WITH IFB NO. 383-138-64, IN DIRECT VIOLATION OF AN IMPLIED AGREEMENT BETWEEN THE PARTIES.

ON PAGE 4 OF THE ABOVE REFERRED TO LETTER, IT IS STATED:

"WE CONTEND THAT THE NAVY-GRIMES RELATIONSHIP ESTABLISHED EARLY AND CONTINUED WITHOUT CHANGE OVER A PERIOD OF MANY YEARS GAVE RISE TO A CONTRACT IMPLIED IN FACT. NAVY, IN ITS CONTRACTUAL RELATIONSHIPS WITH THE COMPANY, IS TO BE TREATED AS OTHER CONTRACTORS UNDER ANALOGOUS SITUATIONS. UNITED STATES V. STANDARD RICE COMPANY 323 U.S. 106/1944). WHEN PROBLEMS OF THE INTERPRETATION OF THE GOVERNMENT'S CONTRACTS ARISE, THE GENERAL LAW OF CONTRACTS GOVERNS. LYNCH V. UNITED STATES, 292 U.S. 571/1934); UNITED STATES V. PURCELL ENVELOPE COMPANY, 249 U.S. 313/1919); THE FLOYD ACCEPTANCES, 74 U.S. (7 WALL/666/1869). THE GENERAL LAW PERTAINING TO CONTRACTS IMPLIED IN FACT HAS BEEN SUMMARIZED THUS: "ANY CONDUCT OF ONE PARTY FROM WHICH THE OTHER PARTY MAY REASONABLY DRAW THE INFERENCE OF A PROMISE IS EFFECTIVE IN LAW AS SUCH, AND CONDUCT OF THE PARTIES IS TO BE VIEWED AS A REASONABLE MAN WOULD VIEW IT TO DETERMINE THE EXISTENCE OR NOT OF AN IMPLIED IN FACT CONTRACT.' 17 CJS, CONTRACTS SEC. 4 AT 557; ROEBLING V. DILLON, 288 F.2D 386, 109 U.S.APP.D.C. 402.

"THE PRESENT INQUIRY, THEN, MUST PIVOT ON THE QUESTIONS OF GRIMES' REASONABLENESS AND THE CONDUCT OF THE PARTIES. IF GRIMES REASONABLY DETERMINED CONDUCT THAT GAVE RISE TO A PROMISE, THEN THE LAW PROVIDES THAT A CONTRACT EXISTS. THE REASONING IS VERY CLOSE TO THAT OF A PROMISSORY ESTOPPEL: IF ONE PARTY GAVE THE OTHER REASON TO BELIEVE A PROMISE HAD BEEN MADE, AND IF THE OTHER PARTY THEREUPON RELIES TO HIS DETRIMENT, THE FIRST PARTY WILL BE ESTOPPED TO DENY THE EXISTENCE OF CONTRACT. SEE, THE PABLOC COMPANY V. UNITED STATES, COURT OF CLAIMS DOC. NO. 523-57 (APRIL 5, 1963). THE CONDUCT OF THE NAVY WHICH GAVE RISE TO THE CONTRACTUAL RELATIONSHIP WAS DICHOTOMOUS IN THAT, FIRST, EARLIER NAVY HAD EXPRESSLY ACCEPTED AT ARM'S LENGTH AND AFTER DISCUSSION THE ARRANGEMENT WHEREBY GRIMES WOULD FREELY SUBMIT PROPRIETARY DATA WHICH WOULD THEN BE KEPT CONFIDENTIALLY; AND SECOND, ALWAYS THEREAFTER NAVY HAD ACQUIESCED TO THE RELATIONSHIP AND IN NO WAY EVER INDICATED ITS DISAPPROVAL. IN FACT, NAVY INDICATED ITS APPROVAL OF THE RELATIONSHIP BY ALWAYS ACCEPTING THE DRAWINGS PURSUANT TO AND CONDITIONED UPON THIS UNDERLYING ARRANGEMENT BETWEEN THE PARTIES.'

IN FURTHER SUPPORT OF YOUR ARGUMENT, YOUR LETTER ALSO DIRECTS ATTENTION TO TWO RECENT DECISIONS OF OUR OFFICE, B-150369, AUGUST 22, 1963, AND 41 COMP. GEN. 148.

ON PAGE 2 OF THE ADMINISTRATIVE REPORT, THE CONTRACTING OFFICER STATES:

"IT IS THE BELIEF OF THIS ACTIVITY THAT THE NAVY HAS NO CHOICE BUT TO USE THE GRIMES DRAWINGS FOR COMPETITIVE PROCUREMENT PURPOSES IF THIS WILL ENHANCE THE POSSIBILITY OF GETTING COMPETITIVE BIDS. GRIMES DID NOT TAKE THE PRECAUTION OF INCLUDING A RESTRICTIVE-USE LEGEND ON ITS DRAWINGS AND DID NOT IN ANY OTHER WAY NOTIFY THE NAVY THAT IT CONSIDERED THAT ITS DRAWINGS CONTAINED PROPRIETARY DATA AND WERE BEING FURNISHED FOR LIMITED- USE PURPOSES. THE CONTRACTING OFFICER IS NOT AWARE OF ANY AGREEMENT OR "NAVY-GRIMES RELATIONSHIP" THAT IN ANY WAY AMOUNTED TO AN AGREEMENT OR UNDERSTANDING, THAT THE NAVY WOULD NOT USE THE GRIMES DRAWINGS FOR COMPETITIVE PROCUREMENT PURPOSES. THE CONTRACTING OFFICER IS NOT AWARE OF ANY "DISCUSSION" OF THE MATTER, AS ALLEGED ON PAGE 4 OF THE PROTEST LETTER OF 17 FEBRUARY 1964 TO THE COMPTROLLER GENERAL, AND SINCERELY DOUBTS THAT ANY SUCH DISCUSSION TOOK PLACE. THE CONTRACTING OFFICER DOES NOT, THEREFORE, CONSIDER THAT THE ACCEPTANCE OF THE GRIMES DRAWINGS WAS AN "ACQUIESCENCE" TO A CONFIDENTIAL RELATIONSHIP.'

SINCE YOUR POSITION IS PREDICATED UPON THE EXISTENCE OF AN "IMPLIED CONTRACT" WE BELIEVE IT PERTINENT TO FIRST POINT OUT THAT A DISTINCTION MUST BE DRAWN BETWEEN CONTRACTS "IMPLIED IN LAW" AND CONTRACTS "IMPLIED IN FACT.' AS DISTINGUISHED FROM CONTRACTS IMPLIED IN LAW OR QUASI CONTRACTS, A CONTRACT IMPLIED IN FACT IS ESSENTIALLY BASED ON THE INTENTIONS OF THE PARTIES AND ARISES WHERE THE SURROUNDING FACTS AND CIRCUMSTANCES DISCLOSE THAT THE PARTIES INTENDED TO MAKE A CONTRACT, BUT FOR SOME REASON FAILED TO ARTICULATE THEIR PROMISES. 17 C.J.S. CONTRACTS SEC. 4; AM. LAW INST. RESTATEMENT, CONTRACTS, VOL. 1 SEC. 5; WILLISTON, CONTRACTS 3RD EDITION, SEC. 3. TO BE ACTIONABLE AGAINST THE UNITED STATES, UNDER THE TUCKER ACT (28 U.S.C.A. SEC. 1346 (A) (2) ( ACTIONS ON IMPLIED CONTRACTS ARE LIMITED TO THOSE CONTRACTS WHICH ARE IMPLIED IN FACT, AS OPPOSED TO QUASI CONTRACTS. ALLIANCE ASSURANCE COMPANY V. UNITED STATES, 252 F.2D 529; ROXFORT HOLDING COMPANY V. UNITED STATES, 176 F.SUPP. 587.

TO SUPPORT A HOLDING THAT THE NAVY IMPLIEDLY AGREED NOT TO USE THE DRAWINGS IN QUESTION, IT MUST BE FOUND THAT THE PARTIES INTENDED SUCH AGREEMENT WITHOUT EXPRESSING IT IN WRITING. WE ARE HERE ASKED TO READ A SPECIFIC LIMITATION, NOT OTHERWISE APPEARING, INTO ALL OF GRIMES' CONTRACTS WITH THE NAVY. THIS IS UNREASONABLE UNDER THE CIRCUMSTANCES; ON THE CONTRARY, INASMUCH AS NO RESTRICTIONS WERE EVER NOTED ON THE DRAWINGS IN QUESTION, IT IS QUITE REASONABLE TO CONCLUDE THAT THE PARTIES NEVER INTENDED SUCH A RESULT. INDEED, WE THINK IT CLEAR THAT HAD GRIMES, IN FACT, WANTED TO PLACE ANY SUCH RESTRICTIONS UPON THE USE OF THE DRAWINGS, IT WAS CLEARLY INCUMBENT UPON THE FIRM TO SO ADVISE THE GOVERNMENT RATHER THAN FIRST TO ALLOW THE DRAWINGS TO BE TURNED OVER TO THE GOVERNMENT WITHOUT RESTRICTIONS AND THEN CLAIM THAT THEY WERE TURNED OVER FOR LIMITED PURPOSES ONLY. B-148376, JULY 24, 1962. THIS IS NOT TO SUGGEST, HOWEVER, THAT WE WOULD NOT, UNDER APPROPRIATE CIRCUMSTANCES, FIND AN IMPLIED AGREEMENT.

WE BELIEVE THAT THE CASES RELIED UPON IN SUPPORT OF GRIMES' POSITION ARE CLEARLY DISTINGUISHABLE FROM THE MATTER UNDER DISCUSSION. IN PABLOC COMPANY, INC. V. UNITED STATES, CT.CL.NO. 523-57, APRIL 5, 1963, THE COURT OF CLAIMS HELD THAT PLAINTIFF WAS ENTITLED TO RELIEF WHERE THE FACTS SHOWED THAT GOVERNMENT OFFICIALS APPARENTLY LED THE CONTRACTOR TO BELIEVE THAT THE GOVERNMENT WAS ACCEPTING CERTAIN INFORMATION FOR "INSPECTIONAL PURPOSES" ONLY WHEN IN FACT THE INFORMATION WAS USED FOR PURPOSES OF PROCUREMENT. ON PAGE 8, THE COURT STATES:

"* * * THE BASIC LETTER OF MAY 28TH MADE IT CLEAR THAT THE CONFIDENTIAL INFORMATION COULD BE USED BY THE DEFENDANT "FOR INSPECTION PURPOSES" ONLY, UNTIL THE FULL 104,000 ITEMS HAD BEEN PROCURED. FOR THE REASONS ALREADY ELABORATED, IT IS WHOLLY APPROPRIATE (AND FULLY IN ACCORD WITH REALITY) TO READ THE DEFENDANT'S LETTER OF JUNE 7TH, ALTHOUGH IT DID NOT SAY SO IN WORDS, AS IMPLIEDLY PROMISING TO ABIDE BY THAT PROVISION WHEN THE INFORMATION WAS FORWARDED.'

IN THE CASE UNDER DISCUSSION WE HAVE NO SUCH FACTS. THE NAKED ALLEGATION THAT SUCH AN AGREEMENT EXISTED BETWEEN THE PARTIES IS EXPRESSLY AND UNEQUIVOCALLY DENIED BY THE NAVY.

IN 41 COMP. GEN. 148 THE FACTS SHOWED THAT THE PROTESTING BIDDER HAD BOTH DEVELOPED AND PRODUCED A PARTICULAR TYPE OF EMPENNAGE STAND. THE AIR FORCE SUBSEQUENTLY BECAME INTERESTED IN THE STAND AND REQUESTED INFORMATION IN ORDER TO DETERMINE WHETHER IT WOULD BE ADVISABLE TO PURCHASE THIS EQUIPMENT. PURSUANT TO THIS REQUEST, THE DEVELOPER FORWARDED VARIOUS DRAWINGS EACH LABELED "PATENT PENDING.' SOMETIME THEREAFTER, AN INVITATION TO BID WAS ISSUED ON A STAND. THE ACCOMPANYING SPECIFICATIONS WERE DERIVED FROM THE DEVELOPER'S OWN DRAWINGS. RESPONDING TO THE INVITATION, THE DEVELOPER STATED ITS BID WAS NOT A COMPETITIVE BID SINCE THE INVITATION CONTAINED ITS DESIGN. THIS RESTRICTIVE LANGUAGE WAS SUBSEQUENTLY DELETED BY THE DEVELOPER UPON THE EXPRESS REPRESENTATION BY GOVERNMENT AGENTS THAT THE LANGUAGE RESTRICTING THE USE OF THE DRAWINGS AND DISALLOWING ANY REPRODUCTION WOULD BE INCLUDED IN THE FINAL CONTRACT. SUBSEQUENTLY, THE DEVELOPER SIGNED A CONTRACT UNDER THE BELIEF THAT IT CONTAINED SUCH RESTRICTIVE LANGUAGE. IN GRANTING RELIEF, OUR OFFICE TOOK THE POSITION THAT THE GOVERNMENT CLEARLY UNDERSTAND IN THE FIRST INSTANCE THAT THE DRAWINGS WERE SUBMITTED FOR LIMITED PURPOSES ONLY AND THAT THE REMOVAL OF THE RESTRICTIVE LANGUAGE IN QUESTION WAS INDUCED BY FALSE REPRESENTATIONS.

OUR DECISION, B-150369, AUGUST 22, 1963, LIKEWISE IS DISTINGUISHABLE FROM THE PRESENT CASE IN THAT THE PROTESTING FIRM WAS INDUCED TO SUPPLY PROPRIETARY DATA UPON REPEATED ASSURANCES OF RESPONSIBLE PROCUREMENT OFFICIALS THAT THE PLANS IN QUESTION WOULD BE HELD CONFIDENTIAL AND USED FOR IDENTIFICATION AND CATALOGING PURPOSES ONLY. AGAIN WE SHOULD LIKE TO POINT OUT THAT WE HAVE NO SUCH FACTS HERE.

SINCE THE FACTS ARE CLEARLY INADEQUATE TO SUPPORT THE FINDING OF AN IMPLIED AGREEMENT NOT TO DISCLOSE THE DRAWINGS IN QUESTION, WE FIND NO BASIS UPON WHICH TO SUSTAIN YOUR PROTEST.