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REGIONAL TRANSP. AUTHORITY v. GRUMMAN FLXIBLE CORP.
February 9, 1982
REGIONAL TRANSPORTATION AUTHORITY, PLAINTIFF,
GRUMMAN FLXIBLE CORPORATION, DEFENDANT.
The opinion of the court was delivered by: Shadur, District Judge.
MEMORANDUM OPINION AND ORDER
Exhaustion of Administrative Remedy
Section 2.17 of the Flxible-RTA sales contract (the
Except as otherwise provided in this contract, any
dispute concerning a question of fact arising
under this contract which is not disposed of by
agreement shall be decided by the Contracting
Officer, who shall reduce his decision to writing
and mail or otherwise furnish a copy thereof to
Flxible argues RTA's complaint involves an "issue of fact
arising under the contract" so that RTA must first exhaust the
Agreement's administrative remedy before it can file a court
This case differs from the normal contract interpretation
problem of construing unique language chosen by the parties.
Here Section 2.17 (the "disputes clause") is a standard
provision employed in government contracts for at least 30
years. Many courts including the Supreme Court have examined
the scope of the disputes clause, providing this Court with
clear guidance to its proper application.
In its definitive reading of the disputes clause, United
States v. Utah Construction Co., 384 U.S. 394, 86 S.Ct. 1545,
16 L.Ed.2d 642, (1966), the Supreme Court distinguished two
types of contract-related disputes. One kind is specifically
anticipated and provided for in a contract. For example "when
the contract makes provision for equitable adjustment of
particular claims, such claims may be regarded as converted
from breach of contract claims to claims for relief under the
contract." Id. at 404 n. 6, 86 S.Ct. at 1551 n. 6. But any
claim "not redressable under specific contract adjustment
provisions" is termed a "breach of contract claim" and not
subject to the disputes clause. Id. at 404-05 n. 6, 86 S.Ct. at
1551-52 n. 6. Another court, Bethlehem Steel Corp. v. Grace
Line, Inc., 416 F.2d 1096, 1101 (D.C. Cir. 1969), has summed up
the distinction as follows:
A fact dispute is one "arising under this
contract" only when the disputed fact is capable
of complete resolution by a procedure specified in
the contract. In consequence, claims which are
adjustable under contractual provisions must be
submitted for the administrative determinations
prescribed by the contract, while claims for
breach of contract — those not adjustable in that
fashion — may be litigated in a court of competent
jurisdiction without previous resort to that
Application of that dichotomy here leads to the conclusion
that RTA's claim is within the disputes clause. Agreement Part
IV ("Warranty Provisions") affords an extensive warranty for
the complete coach (¶ 1.1.1) as well as many subsystems and
components (¶ 1.1.2). It goes on to deal at length with
Flxible's duty to repair any warranty-covered defects. For
(1) Repairs must begin within 10 working days
after Flxible receives notice of a defect (¶ 2.2).
(2) Flxible must provide spare parts and tools
at its own cost (¶ 2.2).
(3) RTA can require Flxible to remove the buses
from RTA property during the repairs (¶ 2.2).
(4) If a widespread defect ("fleet defect")
occurs Flxible must undertake a program reasonably
designed to prevent the recurrence ...
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