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Call Henry, Inc. v. United States

United States Court of Appeals, Federal Circuit

April 28, 2017

CALL HENRY, INC., Plaintiff-Appellant
UNITED STATES, Defendant-Appellee

         Appeal from the United States Court of Federal Claims in No. 1:14-cv-00989-LAS, Senior Judge Loren A. Smith.

          Brian Koji, Allen, Norton & Blue, PA, Tampa, FL, argued for plaintiff-appellant.

          Robert Norway, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC, argued for defendant-appellee. Also represented by Benjamin C. Mizer, Robert E. Kirschman, Jr., Steven J. Gillingham; James T. Mahoney, Office of Chief Counsel, National Aeronautics and Space Administration, Washington, DC; MacAllister A. West, Cleveland, OH.

          Steven Michael Masiello, Dentons U.S. LLP, Denver, CO, for amicus curiae Professional Services Council. Also represented by Thomas Antoine Lemmer, Joseph G. Martinez, III.

          Before Reyna, Hughes, and Stoll, Circuit Judges.

          Reyna, Circuit Judge.

         Call Henry, Inc., appeals from a Court of Federal Claims ("COFC") decision dismissing its breach of contract claim against the United States government. The COFC correctly determined that Call Henry failed to state a claim for which relief could be granted, because the government has no contractual obligation to reimburse Call Henry's pension withdrawal liability costs that were incurred pursuant to the Multi-Employer Pension Plan Amendment Act of 1980, 29 U.S.C. § 1381, et seq. We therefore affirm.


         On April 23, 2003, Call Henry entered into a contract with the National Aeronautics and Space Administration ("NASA") to provide inspection, maintenance, and testing services. This was a multi-year, fixed-price contract with a base performance period of three years and up to seven one-year option periods. Call Henry's contract was subject to the McNamara-O'Hara Service Contract Act of 1965 ("SCA"), 41 U.S.C. § 6701, et seq., and its implementing regulations.

         A. The Service Contract Act

         As relevant here, the SCA requires that a service contract include provisions specifying the contract's "wage determination, " which sets the wage rates and fringe benefits that must be paid to various classes of covered service employees. Covered service employees are entitled to a wage determination providing wages and fringe benefits equal to or greater than: (1) the minimum wage provided pursuant to the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 206; (2) the prevailing rates provided in the locality where the services are performed, as determined by the Department of Labor ("DOL"); or (3) the rates contained in the predecessor contract's collective bargaining agreement. 41 U.S.C. §§ 6703, 6704; 48 C.F.R. §§ 22.1002-2, 22.1002-3; see also Lear Siegler Servs., Inc. v. Rumsfeld, 457 F.3d 1262, 1266-67 (Fed. Cir. 2006).

         Among other things, the SCA insures that service employees who were protected by a collective bargaining agreement with one contractor are not deprived of the wages and benefits negotiated in that collective bargaining agreement when the contract they work on is competitively awarded to a new contractor. Otherwise, if an incumbent contractor agreed to a collective bargaining agreement that provided for wages and benefits greater than the prevailing wage rate, a challenger could underbid the incumbent for the follow-on contract by providing its employees with lower wages and less valuable benefits. By requiring a successor contractor to provide wages and fringe benefits of equal or greater value than the predecessor contractor, the government protects covered service employees from losing the protection of their collective bargaining agreements. The government also protects itself from successor contractors who might introduce performance risk in the form of underpaid or low-quality labor.

         These requirements are reflected in Federal Acquisition Regulation ("FAR") clause 52.222-41 entitled Service Contract Labor Standards, which is incorporated by reference into Call Henry's NASA contract:

         52.222-41, Service Contract Act of 1965, as Amended (May 1989).

         (c) Compensation.

(1) Each service employee employed in the performance of this contract by the Contractor or any subcontractor shall be paid not less than the minimum monetary wages and shall be furnished fringe benefits in accordance with the wages and fringe benefits determined by the Secretary of Labor, or authorized representative, as specified in any wage determination attached to this contract.
. . . . (f) Successor contracts. If this contract succeeds a contract subject to the Act under which substantially the same services were furnished in the same locality and service employees were paid wages and fringe benefits provided for in a collective bargaining agreement, in the absence of the minimum wage attachment for this contract setting forth such collectively bargained wage rates and fringe benefits, neither the Contractor nor any subcontractor under this contract shall pay any service employee performing any of the contract work (regardless of whether or not such employee was employed under the predecessor contract), less than the wages and fringe benefits provided for in such collective bargaining agreement, to which such employee would have been entitled ...

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