Virginia Lawyers Weekly VA Lawyers Weekly
Where a security company alleged that the Lynchburg Redevelopment and Housing Authority, or LRHA, failed to pay for 24 surveillance cameras, LRHA’s statute of frauds argument was rejected because the complaint alleged part performance.
Background
This case is a contract dispute between plaintiff Ocean 10 Security, a provider of security cameras and security services, and defendant LRHA, the public housing authority for the city of Lynchburg. LRHA has filed a motion to dismiss in which it argues that Ocean 10’s complaint is barred by the statute of frauds and under the Virginia Public Procurement Act or VPPA.
Statute of frauds
Virginia’s statute of frauds provides that “[u]nless a promise, contract, agreement, representation, assurance, or ratification, or some memorandum or note thereof, is in writing and signed by the party to be charged or his agent, no action shall be brought . . . [u]pon any agreement that is not to be performed within a year.” LRHA argues that the contract here falls into the statute of frauds because it could not be performed within one year, being a subscription for three years of service.
LRHA has attached what it says is the final version of the contract between LRHA and Ocean 10. The contract is final and appears to contain all the key elements of the agreement but is not signed by either party. Ocean 10 claims that the purported contract attached to LRHA’s motion to dismiss was not in fact the final agreement, but “the draft contract that Ocean 10 originally presented to LRHA.”
The court holds that, even if the contract fell within the statute of frauds generally, the exception for part performance clearly applies. Ocean 10 alleges that it installed all 24 TSUNAMI systems and operated them for LRHA’s benefit for over a year, and that LRHA made subscription payments under the agreement for over a year. Obviously, Ocean 10 would only have done those things if it had a contract with LRHA to do so.
VPPA
The VPPA provides that “[i]f, after an award, it is determined that an award of a contract was arbitrary or capricious, then the sole relief shall be as hereinafter provided. . . . Where the award has been made and performance has begun, the public body may declare the contract void upon a finding that this action is in the best interest of the public. Where a contract is declared void, the performing contractor shall be compensated for the cost of performance up to the time of such declaration. In no event shall the performing contractor be entitled to lost profits.”
Ocean 10 argues that LRHA never made the requisite preliminary finding that the award was arbitrary and capricious, and it could not skip automatically to the determination that the award was not in the public interest. Indeed, the statute does clearly require the government agency to decide if the award of the contract was arbitrary and capricious, and then decide whether voiding it is in the best interest of the public. The complaint here alleges that LRHA never made a determination that the contract award was arbitrary and capricious before voiding it.
The case law on this provision of the VPPA is slim (there are only a handful of cases on the statute at all, and virtually all of them relate to parts of the statute not at issue here). But the existing cases indicate that this issue should be resolved at summary judgment, not on a motion to dismiss.
For the present purposes of the motion to dismiss, the court holds that Ocean 10 has stated a plausible claim under Counts One and Two, because the complaint alleges that LRHA did not make the requisite preliminary finding that the contract award was arbitrary and capricious, which, if true, would mean that the VPPA’s provisions authorizing government bodies to void contracts are not available as a defense.
Defendant’s motion to dismiss denied.
Ocean 10 Security LLC v. Lynchburg Redevelopment and Housing Authority, Case No. 6:22-cv-7, April 28, 2022. WDVA at Lynchburg (Moon). VLW 022-3-184. 8 pp.
