[00:00:00] Speaker 02:
This morning is fifteen five zero zero four trust title company versus the United States.

[00:00:05] Speaker 02:
Mr. Holmes, whenever you're ready.

[00:00:08] Speaker 04:
Your honor, if it please before, it's Don Holmes from Greensboro, Maryland arguing for trust title.

[00:00:15] Speaker 04:
This is a default termination case.

[00:00:17] Speaker 04:
The contractor is out of business as occurs in a lot of default termination case.

[00:00:22] Speaker 04:
The contract at issue was to

[00:00:24] Speaker 04:
provide settlement services for houses that had been foreclosed upon.

[00:00:30] Speaker 04:
There's a very large volume of those.

[00:00:34] Speaker 04:
They're divided up by states.

[00:00:36] Speaker 04:
This was the North Carolina contract.

[00:00:38] Speaker 04:
There were two contracts to take care of.

[00:00:41] Speaker 01:
What went wrong here?

[00:00:43] Speaker 01:
Was it the volume of work that appeared?

[00:00:47] Speaker 04:
There were, from Trust Title's perspective, there were really two overriding things.

[00:00:54] Speaker 04:
One, the volume that was given because the contract was delayed for a month or two, depending upon how you calculate it, and the volume created problems.

[00:01:06] Speaker 04:
In addition,

[00:01:07] Speaker 04:
there was no excusable delays of any kind granted or considered as you can see from in the briefs this exchange of August 24 and 25.

[00:01:17] Speaker 02:
Were there any requested by the client?

[00:01:19] Speaker 04:
Yes.

[00:01:20] Speaker 02:
Where is that?

[00:01:22] Speaker 04:
It's in the August 24, 2010 document.

[00:01:29] Speaker 04:
We contend that that's where

[00:01:31] Speaker 04:
There was the initial request.

[00:01:33] Speaker 02:
There was also a follow-up request in... Is that the email that you're talking about?

[00:01:36] Speaker 02:
Yes.

[00:01:36] Speaker 02:
Can you give us the page number just so we'll all be sure we're talking about the same thing?

[00:01:40] Speaker 02:
Are you talking about the email JA34?

[00:01:46] Speaker 04:
I believe that's it, Your Honor.

[00:01:48] Speaker 04:
It's the August 24-25 exchange.

[00:01:51] Speaker 04:
There are several places in there.

[00:01:52] Speaker 02:
So where is it in this August 24th email that you requested?

[00:01:58] Speaker 04:
The contractor says he points out why he's being delayed and he says he needs help and time to do the work, I believe.

[00:02:09] Speaker 04:
That's my reading of that document.

[00:02:10] Speaker 02:
So that's not what he said, that's what you're reading this document.

[00:02:13] Speaker 04:
Well, that's, you know, and he, there were all sorts of oral discussions that were going on as well.

[00:02:18] Speaker 02:
Well, let's stay with the document.

[00:02:19] Speaker 02:
What does the document actually say that leads you to interpret it just being a request?

[00:02:25] Speaker 04:
It says that he's having problems because of the lateness in getting going with the job, the fact that he's asking for help from HUD in terms of various forms and other documents that he needs.

[00:02:46] Speaker 04:
And then the contracting officer turned around the next day and said, no to any of these things.

[00:02:53] Speaker 04:
And that was the continual theme, Your Honor, unfortunately.

[00:02:56] Speaker 02:
In response to Judge Newman's question, which was similar to one I had when you said what went wrong here, part of it, at least, is the volume of work.

[00:03:07] Speaker 02:
Why didn't you, you had the ability and the authority to decline to take a fairly large number of cases through this period, this critical period, and your client failed to do that?

[00:03:19] Speaker 02:
He could have done that.

[00:03:20] Speaker 02:
and been home free, or perhaps it could have mitigated at least.

[00:03:25] Speaker 02:
Why didn't he do what he could have done under the contract, as I understand, and declined to accept a bunch of other cases?

[00:03:32] Speaker 04:
There's several reasons, Your Honor.

[00:03:34] Speaker 04:
One is, he didn't, as we said in our brief in one area, he didn't know exactly what cases he had because there were problems with the data that he was getting from HUD.

[00:03:44] Speaker 04:
But in terms of did he have way too many cases beyond the 195 times 2 limit?

[00:03:52] Speaker 04:
Absolutely.

[00:03:53] Speaker 04:
And he was in the first stages of contract performance.

[00:03:57] Speaker 04:
The contracting officer was pressing him for settlements.

[00:04:00] Speaker 04:
There were a lot of reasons to do those settlements.

[00:04:03] Speaker 04:
And he accommodated them.

[00:04:06] Speaker 03:
Your stat was supposed to be up to speed from day one.

[00:04:11] Speaker 03:
There were a bunch of people that supposedly had been hired and were going to be on board, and yet they never showed up.

[00:04:19] Speaker 03:
How do you deal with that?

[00:04:20] Speaker 04:
With respect, Your Honor, I don't think that's the government's position.

[00:04:23] Speaker 04:
I don't think that's correct.

[00:04:24] Speaker 04:
And I think in our reply brief, we tried to answer those issues.

[00:04:28] Speaker 04:
The contract was delayed for a month.

[00:04:31] Speaker 04:
It could have been delayed for three months because it was a protest.

[00:04:35] Speaker 04:
because it was a GAO protest.

[00:04:37] Speaker 04:
If it had been delayed for three months, the contractor went back out and he told people that he'd hired, and he told the real estate people where he had the two offices, he says, we have to do something different here.

[00:04:47] Speaker 04:
So he was prepared to perform, but for the protest.

[00:04:52] Speaker 04:
And we pointed that out in our briefs.

[00:04:56] Speaker 04:
Once the protest ended,

[00:04:58] Speaker 04:
prematurely, which is good, I suppose, in 30 days.

[00:05:01] Speaker 04:
Then he went and got moving.

[00:05:03] Speaker 04:
And within a week to two weeks, he had things in place and he was working.

[00:05:08] Speaker 04:
Were there different people that he was using?

[00:05:10] Speaker 04:
Absolutely.

[00:05:11] Speaker 04:
Because the people had gone.

[00:05:13] Speaker 04:
They'd gone on to other jobs.

[00:05:14] Speaker 04:
They weren't going to wait for a month or two or three.

[00:05:18] Speaker 02:
Can you go back to my question about why he didn't decline to take the application?

[00:05:23] Speaker 02:
I didn't understand your answer.

[00:05:25] Speaker 02:
If at some point didn't he know he was overwhelmed by the number?

[00:05:28] Speaker 02:
He did.

[00:05:29] Speaker 02:
He was having a problem.

[00:05:30] Speaker 02:
And therefore, we charge him with knowing what his rights are under the contract.

[00:05:35] Speaker 02:
And why didn't he just say, OK, let's hold this additional amount?

[00:05:38] Speaker 02:
He had authority to do under the contract so that he could have some time to catch up or repair it.

[00:05:43] Speaker 02:
Didn't he have complete authority to do that?

[00:05:45] Speaker 02:
I don't understand why he didn't.

[00:05:46] Speaker 04:
Your honor, he did.

[00:05:48] Speaker 04:
He could have done that.

[00:05:50] Speaker 04:
I'm agreeing with you.

[00:05:51] Speaker 04:
But he didn't do that.

[00:05:53] Speaker 04:
So what's the consequences of that?

[00:05:55] Speaker 04:
And who created that problem?

[00:05:58] Speaker 04:
The government created that problem.

[00:06:01] Speaker 02:
Well, obviously, he created it.

[00:06:03] Speaker 02:
He had the authority to say, don't give me these extra cases.

[00:06:06] Speaker 02:
And he got these extra cases.

[00:06:08] Speaker 02:
And they at least compounded the problem.

[00:06:10] Speaker 02:
Why isn't the onus on him?

[00:06:12] Speaker 04:
I think it's a mutual thing, your honor.

[00:06:15] Speaker 02:
The most important thing, the point that I haven't... What, the government unilaterally should have said, even though we expect him to say, okay, I can't do this, I don't want to take these 200 extra cases, the government should have denied him those cases or not even tried to send them to him?

[00:06:30] Speaker 04:
I don't understand why... Right, and that's exactly what they did with the re-procurement contractors.

[00:06:34] Speaker 04:
They had another program, a bioselect program, where they could place them elsewhere.

[00:06:39] Speaker 04:
I'm saying it's

[00:06:40] Speaker 04:
I'm saying the contractor made a mistake and admitted that.

[00:06:43] Speaker 04:
I mean, he certainly did.

[00:06:44] Speaker 04:
And he said that in his testimony at trial.

[00:06:46] Speaker 04:
You know, we should, you know, with perfect 20-20 hindsight, we shouldn't have taken these on.

[00:06:49] Speaker 04:
But we did take them on, and we got into it, and we got no help, and we got no extra time.

[00:06:56] Speaker 02:
Why is it a matter of hindsight?

[00:06:58] Speaker 02:
I mean, this all happened within a fairly short period of time.

[00:07:03] Speaker 02:
So it wasn't like a year later when he looks back on it, he could figure out that he was overloaded.

[00:07:08] Speaker 02:
He knew every day from the time this contract started that there was a problem, and it was getting worse rather than better.

[00:07:14] Speaker 02:
So I don't understand why you say in hindsight.

[00:07:17] Speaker 02:
He acknowledges that he could have not taken the cases and maybe survived.

[00:07:23] Speaker 04:
You have to view in context this contract.

[00:07:26] Speaker 04:
It was 90 days.

[00:07:28] Speaker 04:
It was to be a three-year contract.

[00:07:29] Speaker 04:
It was terminated for default in 90 days.

[00:07:32] Speaker 04:
Within the first, let's assume performance started on August the 7th.

[00:07:36] Speaker 04:
Although there's some debate about that.

[00:07:38] Speaker 04:
Here he is on August the 20th.

[00:07:41] Speaker 04:
forth, writing to the government and saying, we've got terrible problems here, and we need your help in this email exchange.

[00:07:46] Speaker 02:
We can keep talking about the email, but I don't see where it says.

[00:07:50] Speaker 02:
So maybe you can show me where it says, we have terrible problems and we need your help.

[00:07:54] Speaker 02:
I'm looking at the, if we're talking about the same email.

[00:07:56] Speaker 04:
We are talking about the same email, Your Honor.

[00:07:58] Speaker 04:
Where is it in the... You need to read the, with respect, you need to read the government's response too, which is, none of these delays...

[00:08:07] Speaker 04:
None of these delays.

[00:08:09] Speaker 02:
Well, you didn't tell me about the government.

[00:08:10] Speaker 02:
You said that's what he said.

[00:08:12] Speaker 02:
We got terrible problems.

[00:08:13] Speaker 02:
Right.

[00:08:13] Speaker 02:
Where do you glean from the email that leads us would draw that conclusion?

[00:08:20] Speaker 04:
I'm sorry, Your Honor, but that's the way I read the email that he's asking.

[00:08:26] Speaker 04:
And the government contractor, you don't tell the government necessarily something terrible in terms of the world is coming to an end.

[00:08:34] Speaker 04:
He was trying to be professional about what he said, and that he needed help.

[00:08:38] Speaker 04:
He needed help.

[00:08:40] Speaker 04:
And the next day, the government says, none of these delays qualify.

[00:08:45] Speaker 04:
None of these situations qualify for any excusable delay.

[00:08:53] Speaker 02:
And where was the government email?

[00:08:55] Speaker 04:
It's in the briefs and the appendix is right behind it.

[00:09:01] Speaker 04:
It's in the chain.

[00:09:02] Speaker 01:
It looks from the record as if the government put a lot of weight on the delay in forwarding the proceeds when they were received, is that correct?

[00:09:12] Speaker 04:
Yes, and that's a separate, to me this case is divided into two parts.

[00:09:18] Speaker 04:
The first part is that the delay, the fact that there was a 30-day delay or more from the protest

[00:09:24] Speaker 04:
And there was the contractor had at least 30 days to do his first settlements.

[00:09:31] Speaker 04:
It says that in his proposal.

[00:09:34] Speaker 04:
It says that in the contract.

[00:09:36] Speaker 04:
It says that in HUD's contract is 45 days.

[00:09:40] Speaker 04:
The contracting officer wanted instant performance.

[00:09:44] Speaker 04:
This is what threw everything off.

[00:09:45] Speaker 04:
He never recovered from that situation.

[00:09:48] Speaker 04:
And he only had three months to recover from it.

[00:09:52] Speaker 04:
After the first month and a half, he was sunk.

[00:09:54] Speaker 04:
There's no doubt.

[00:09:55] Speaker 04:
I mean, he was sunk.

[00:09:57] Speaker 03:
Well, wasn't he sunk by not having an attorney on staff?

[00:10:03] Speaker 04:
Your Honor, he had made provisions to get attorneys.

[00:10:06] Speaker 04:
He had attorneys signed up originally to do it.

[00:10:09] Speaker 04:
And the delay caused him to lose.

[00:10:12] Speaker 04:
You know, those people in it.

[00:10:13] Speaker 02:
Is that really true?

[00:10:14] Speaker 02:
Is that really what the record reveals?

[00:10:16] Speaker 02:
Yes.

[00:10:16] Speaker 02:
Because I thought he had some notion that he could get attorneys to do it for free in exchange for further cases, and that that never came to fruition.

[00:10:25] Speaker 02:
I'm not clear on, maybe you're right, but I didn't know that that was a result, that losing the attorney's assistance was attributable to the 30-day delay.

[00:10:36] Speaker 02:
Is that in the record?

[00:10:37] Speaker 02:
Is that established?

[00:10:37] Speaker 02:
I believe so, Your Honor.

[00:10:38] Speaker 02:
Is that a finding that the court made?

[00:10:39] Speaker 02:
Yes, I believe.

[00:10:39] Speaker 04:
I believe that that, where is that?

[00:10:43] Speaker 04:
It was in testimony at the trial below, what he had done, Mr. Garner's testimony.

[00:10:49] Speaker 01:
And the testimony also said or hinted that there was some sort of, I use the word conspiracy, but that the local lawyers were not

[00:11:04] Speaker 01:
interested in the arrangement that he was proposing?

[00:11:07] Speaker 04:
I think the local bar, I mean I think there's a number of things in the record, the local bar was not happy about a title company doing this work and that's what had happened before that the company didn't know about in the 2005 to 2010 contract was, started out as a title company and then the government, the HUD said you know you're going to be terminated for default if you don't become a law firm.

[00:11:29] Speaker 04:
You have to go make yourself into a law firm, which they did.

[00:11:32] Speaker 01:
This is not a company that was new to the title business, is that right?

[00:11:39] Speaker 01:
That's correct.

[00:11:40] Speaker 04:
They were new to the government business, but they had done

[00:11:43] Speaker 04:
a great deal of commercial work.

[00:11:45] Speaker 04:
Correct?

[00:11:45] Speaker 04:
Have they done that work in North Carolina?

[00:11:47] Speaker 04:
They had done some work in North Carolina.

[00:11:49] Speaker 03:
So they knew that an attorney was required?

[00:11:51] Speaker 04:
Well, they knew an attorney was required to review, just like in lots of states, is required to review some of the documents, but not to do the clerical paper-pushing stuff, which is what drives the price up if you have lawyers doing that.

[00:12:06] Speaker 04:
This contract would be $225 a unit, which is a good deal less than what people pay when they go to settlements one at a time.

[00:12:17] Speaker 04:
There were going to be several thousand settlements.

[00:12:23] Speaker 02:
Okay.

[00:12:23] Speaker 02:
Why don't we hear from the government?

[00:12:25] Speaker 02:
Why don't we save your time?

[00:12:27] Speaker 04:
Yes, thank you, Your Honor.

[00:12:41] Speaker 00:
Help me out with your name.

[00:12:43] Speaker 00:
Eric Laughriven for the United States.

[00:12:46] Speaker 00:
May it please the court?

[00:12:47] Speaker 00:
Trust titles post trial appeal should be denied because they fail to identify any legal error in the trial court's decision.

[00:12:54] Speaker 00:
After a six day trial with over 10 witnesses, hundreds of exhibits and, you know,

[00:13:02] Speaker 00:
In six days of trial, the trial court sustained the default termination of trust title on two independent grounds.

[00:13:08] Speaker 00:
The first ground was trust title's failure to make progress in closing the cases it was assigned so as to endanger the performance of the contract.

[00:13:17] Speaker 00:
And the second, independent basis for the termination was trust title's repeated failure to comply with the contractual covenant to wire funds from the sales proceeds by no later than 2 p.m.

[00:13:27] Speaker 00:
the next business day.

[00:13:31] Speaker 03:
Doesn't the record show that compliance was like 3% or some such number?

[00:13:38] Speaker 00:
Yes, Trust Title understood from the solicitation that 100% compliance was expected for this requirement and Trust Title failed to meet this requirement in virtually every single case that it closed.

[00:13:49] Speaker 02:
Let's assume hypothetically that there's a situation in which somebody's got all their employees hired and everybody's ready to go and then in this case there's a protest and therefore there's a delay.

[00:14:00] Speaker 02:
So the contractor

[00:14:02] Speaker 02:
becomes unable to perform at the get-go because of that.

[00:14:05] Speaker 02:
He loses the employees that he was supposed to retain, etc.

[00:14:09] Speaker 02:
What would a normal, what would a person do in the government's view to try to remedy that or to avoid default in those circumstances?

[00:14:17] Speaker 00:
In this case, the contract provided the contractor with a very specific remedy and that's to request

[00:14:22] Speaker 00:
in writing, an equitable adjustment in time or money, specifying what additional cost resulted from the delay and what additional time it needed to perform the contract.

[00:14:31] Speaker 02:
In your view, did the contractor in this case ever do that?

[00:14:35] Speaker 00:
No, the contractor didn't do it.

[00:14:37] Speaker 00:
It was admitted and the trial court agreed and found that the contractor did not

[00:14:40] Speaker 00:
assert it's right under the contract.

[00:14:42] Speaker 02:
What about these emails that we've been referring to?

[00:14:44] Speaker 00:
The emails don't express any sort of indication of we need X amount of time or we need X amount of money in order to successfully perform the contract.

[00:14:54] Speaker 00:
With respect to the amount of the volume, it doesn't indicate any sort of notification to the contracting officer that it was declined to refuse any of the assignments.

[00:15:08] Speaker 00:
Unless the court has further questions, we rest on our briefs and respectfully request that the trial court's judgment be affirmed.

[00:15:25] Speaker ?:
Thank you.

[00:15:25] Speaker ?:
Thank you.

[00:15:27] Speaker 04:
I want to respond on the issue of the compensable delay versus excusable delay, because I think there's confusion about that.

[00:15:34] Speaker 04:
And I think the trial court was confused about that.

[00:15:36] Speaker 04:
I agree with Mr. Lovegrave.

[00:15:38] Speaker 04:
We had a long trial.

[00:15:40] Speaker 04:
There was times when it was contentious.

[00:15:42] Speaker 04:
The trial judge was fair and even-handed.

[00:15:45] Speaker 04:
There's absolutely no complaint about that.

[00:15:47] Speaker 04:
The only objection that we have, the only real objection is we think he made a legal error on the issue of excusable delay.

[00:15:55] Speaker 04:
And that is, all of these things that the court's been asking questions about, that we've been talking about, those are excusable delay kinds of issues.

[00:16:04] Speaker 04:
The contracting officer did not do... Where do you assert, make that assertion?

[00:16:11] Speaker 03:
Where does your client make that assertion in writing?

[00:16:15] Speaker 04:
Your Honor, I think we made it in the twenty-four and twenty-five exchange and also in the fourteen-fifth.

[00:16:21] Speaker 04:
There's a later one in the fourteen-fifth.

[00:16:24] Speaker 03:
Read me.

[00:16:25] Speaker 03:
the language from day 34, 35, where that assertion is made.

[00:16:33] Speaker 03:
I don't have it in front of me, Your Honor.

[00:16:34] Speaker 02:
It's in your appendix.

[00:16:36] Speaker 04:
I don't have the paper with me, Your Honor.

[00:16:39] Speaker 04:
But I think it is what it is.

[00:16:44] Speaker 04:
I can't characterize it other than say, those are the two things we're relying on.

[00:16:49] Speaker 04:
But here's the one point that I think is being missed, and that is,

[00:16:52] Speaker 04:
Excuseable delay is something in the default clause that you don't have to give a written notice for.

[00:16:59] Speaker 04:
Indeed, the contracting officer under Darwin and Lisbon has an obligation to co-make those assessments themselves.

[00:17:08] Speaker 04:
Is this contractor excusably delayed?

[00:17:11] Speaker 04:
Not that he's entitled to more money, but do these events give rise to an excusable delay?

[00:17:17] Speaker 04:
so that I should not default terminate this contract.

[00:17:21] Speaker 04:
I should give him more time.

[00:17:23] Speaker 01:
Is the issue here the repercurement costs, the remedy that you're seeking?

[00:17:30] Speaker 01:
It relates to the cost of the re-procurement?

[00:17:34] Speaker 04:
The trial judge upset the re-procurement, Your Honor, below.

[00:17:37] Speaker 04:
And there are no re-procurement costs left.

[00:17:40] Speaker 01:
Oh, OK.

[00:17:41] Speaker 04:
Those were upset.

[00:17:42] Speaker 04:
What we're seeking is a termination for convenience so we can get paid some of the costs that we expended on the job.

[00:17:48] Speaker 04:
But the re-procurement cost thing was upset by the trial judge for dissimilarity.

[00:17:54] Speaker 04:
But I think the excusable delay point is important.

[00:17:58] Speaker 04:
You know, in addition to telling the government what we think we told them in the 24-25 exchange and the 14th exchange, that the contracting officer under Darwin and Lisbon, this being a failure to make progress case, had an obligation to go make her own assessment of those issues.

[00:18:20] Speaker 04:
She decided from the 25th on, no excusable delays from any source at all.

[00:18:28] Speaker 04:
And that's not what the FAR regulations call for in a default investigation as considered in the Darwin case.

[00:18:36] Speaker 04:
And it's not what, you know, and it's not appropriate and it's not fair either, Your Honor.

[00:18:44] Speaker 02:
Thank you.