SAN DIEGO (CN) – A bitter five-year legal battle between nonprofits over government contracts to help the disabled cannot be decided on summary judgment, a federal judge ruled this week, though the plaintiff appears to have a tough fight ahead.
SourceAmerica is one of two central nonprofits tasked with recommending government contracts for other nonprofits that employ blind or severely disabled people through the federal AbilityOne program.
Congress created AbilityOne through the Javits-Wagner-O’Day Act of 1971, to help employ blind and other disabled people to produce goods and services under federal contracts. SourceAmerica was incorporated as the National Industries for the Severely Handicapped in 1974 and changed its name to SourceAmerica in 2013. It assists more than 1,300 nonprofits with a variety of services, including information and guidance, according to publicly available information.
Bona Fide Conglomerate Inc. sued SourceAmerica in 2014, claiming it had violated a 2012 settlement on procurement of janitorial services.
Bona Fide had claimed that SourceAmerica rigged bids to favor by companies run by members of SourceAmerica’s board of directors. It claims it still has not received any AbilityOne contracts, though it has applied for 15 of them.
However, Bona Fide does provide janitorial services on five AbilityOne contracts in three states, according to U.S. District Judge Gonzalo Curiel’s case summary.
In a 30-page order on Monday, made available Tuesday, Curiel refused to dismiss the single remaining claim for breach of contract involving Bona Fide’s lost profits.
In its motion for summary judgment, SourceAmerica claimed that lost profits could not be recovered as a matter of law, and that even if Bona Fide could recover them, it lacks evidence of any such damages.
Curiel’s order did not identify the amount of lost profits Bona Fide is claiming. Both parties have requested redactions and filing of documents under seal as the case has moved through Federal Court.
SourceAmerica claims Bona Fide cannot recover lost profits because the profits were not foreseeable when they entered into the settlement agreement. It also objected to the expert Bona Fide hired to offer an opinion on the alleged lost profits.
It also claimed that Bona Fide cannot recover lost profits because SourceAmerica can only recommend nonprofit organizations for AbilityOne contracts, but does not award them.
Curiel disputed that, finding that SourceAmerica does control which service providers are or are not recommended for AbilityOne contracts.
“SourceAmerica neglects to account for its ability to not recommend Bona Fide to the AbilityOne Commission. As a result, SourceAmerica accordingly possessed the power to prevent Bona Fide from being awarded the federal contract at issue,” Curiel wrote.
Tapes made available by WikiLeaks in 2015 show SourceAmerica’s former lead counsel said the bidding process for AbilityOne contracts was rigged and that SourceAmerica “operated like the Mafia,” according to arguments made in court in February 2016.
CNN reported on July 31, 2015 that the Department of Justice was investigating SourceAmerica and AbilityOne for allegations of fraud, mismanagement, and steering of contracts.
Curiel wrote this week that Bona Fide has a “burden” it “will have to shoulder” to prove the alleged contract breach at trial.
“Bona Fide may well face an uphill battle at trial with respect to the particulars of its damages calculations. … It may become evident at trial that Bona Fide’s damages calculations lack a sufficient basis to meet the reasonable certainty standard. However, the fact of the matter is that SourceAmerica has not carried its burden with respect to the instant motion for summary judgment,” Curiel wrote.
He also questioned SourceAmerica’s claims that Bona Fide was not qualified to provide services on the contracts for which Bona Fide applied, “involving services it has little to no experience providing, in areas where it has never done business, requiring in some instances top secret security clearances it does not possess, and at contract sizes that are multiples larger in scale” — citing SourceAmerica.
“Calling into question Bona Fide’s qualifications and suitability for the opportunities at issue does not establish that Bona Fide’s damages elude reasonable ascertainment as a matter of law,” Curiel found.
SourceAmerica estimates contract values for each project, which Curiel said “provide, at minimum, a certain baseline for calculating damages”
He also found that Bona Fide did not appeal any of SourceAmerica’s contract procurement recommendations to the AbilityOne Commission or file a protest lawsuit in the Court of Federal Claims, though it had done so in the past.
Despite describing the challenges Bona Fide must face, Curiel said a fact-finder must decide the issue, and refused to grant SourceAmerica’s request for summary judgment or partial summary judgment.