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UNITED STATES v. GENERAL ELECS.

February 18, 1983

UNITED STATES OF AMERICA, Plaintiff,
v.
GENERAL ELECTRONICS, INC., Defendant



The opinion of the court was delivered by: DEBEVOISE

 Plaintiff, United States of America (the "government"), sues defendant, General Electronics, Inc. ("General") to enforce the provisions of a guaranty agreement. Jurisdiction is asserted under 28 U.S.C. § 1345. The case is presently before the court on cross-motions for summary judgment.

 Under Rule 56 of the Federal Rules of Civil Procedure, summary judgment may be entered on the pleadings, depositions, answers to interrogatories, admissions on file, together with the affidavits, if any, showing there is no genuine issue as to any material facts and that the moving party is entitled to judgment as a matter of law. Hollinger v. Wagner Min. Equipment Co., 667 F.2d 402 (3d Cir. 1981). By virtue of the allegations in the pleadings, which are not denied, and by virtue of extensive admissions, there are no disputed facts material to the resolution of this case.

 Fairfield Scientific Corporation ("Fairfield") submitted a bid for the award of a contract to provide the Navy with impulse cartridges. On October 10, 1972, prior to the award of the contract to Fairfield, General entered into a written guaranty agreement with the Navy. Under Paragraph 1 of the agreement, General "absolutely guarantees the full, complete and faithful performance" by Fairfield of its procurement contract. Under Paragraph 4, General's guaranty became "absolute" upon termination for default under the terms of the contract.

 Paragraph 7 of the contract provided:

 
Extent of guarantor's liability. In the event the Government terminates such contracts for default and awards the uncompleted portion of such contract to another source at a fair and reasonable price, the Guarantor shall be liable for any excess costs incurred by the Government as a result of such reprocurement. In addition, the Guarantor shall be liable for all costs and expenses paid or incurred by the Government in enforcing this Guaranty. The contracting officer representing the Government in connection with such contract shall determine the total cost and expenses, if any, incurred by the Government. The contracting officer's decision shall be subject to appeal by the Guarantor under the "Disputes" Clause set forth in Section VII of the Armed Services Procurement Regulation, which "Disputes" Clause is incorporated herein by reference.

 The Disputes Clause contained in Section 7 of the Armed Services Procurement Regulation provided in part that:

 
The decision of the Contracting Officer shall be final and conclusive unless, within 30 days from the date of receipt [of the contracting officer's decision] the Contractor mails or otherwise furnishes to the Contracting Officer a written appeal addressed to the Secretary. 32 CFR § 7.103-12.

 On October 27, 1972, the government awarded a contract to Fairfield for the manufacture and delivery of a quantity of impulse cartridges. This procurement contract was covered by General's guaranty agreement. Fairfield did not deliver the impulse cartridges as scheduled, and on November 5, 1973, the Navy contractor in charge of the contract terminated it for failure to make timely delivery.

 On January 25, 1974, a contract was awarded to a new contractor to supply the impulse cartridges.

 By letter dated March 15, 1976, the contracting officer rendered a final decision assessing against Fairfield excess costs of reprocurement in the amount of $50,460 plus interest.

 On March 31, 1976, acting pursuant to a Disputes Clause identical to the one contained in the General guaranty, Fairfield timely appealed the final decision of the contracting officer to the Armed Services Board of Contract Appeals. General, however, did not pursue its remedies under the standard Disputes Clause incorporated in its guaranty agreement.

 On October 28, 1977, the Board rendered its final decision. After making extensive findings of fact, the Board affirmed the government's termination of Fairfield's contract for default. It also ruled that the contracting officer miscalculated the amount of excess costs incurred by the government and adjusted the amount of the excess cost to $46,946.60. Additionally, the Board sustained the contracting officer's computation and award of interest. By letter dated March 2, 1978, the government demanded payment from both Fairfield and General.

 On April 7, 1978, Fairfield filed a suit in the United States Court of Claims seeking review of the Board's decision pursuant to 41 U.S.C. §§ 321 and 322. General was not a party to the Court of Claims proceeding. The government counterclaimed for $46,946.60, the ...


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