Jury to decide if LHRA is liable for voiding contract

Where the Lynchburg Redevelopment and Housing Authority, or LRHA, voided a contract for security services, a jury will decide if the contract award was arbitrary or capricious and if the security system manufacturer mitigated its damages.

Background

Ocean 10 is the manufacturer of the TSUNAMI system, an advanced, mobile security camera surveillance system. Ocean 10 leases TSUNAMI systems to customers and provides them with security services, such as installation, maintenance, repairs and upgrades. In this lawsuit, Ocean 10 seeks damages from LRHA for voiding their security services contract. Ocean 10 and LRHA have filed cross-motions for summary judgment. Ocean 10 also moves to exclude testimony of LRHA’s expert, Steven Siegler.

Ocean 10’s MSJ

To establish a breach of contract claim in Virginia, Ocean 10 must show (1) a legally enforceable obligation of LRHA to Ocean 10; (2) LRHA’s violation or breach of that obligation and (3) injury or damage caused to Ocean 10 from the breach.

As to the first element, both parties agree, and the record undisputedly shows that, a valid contract existed between LRHA and Ocean 10. The parties, however, dispute the terms of this contract. At the summary judgment hearing, Ocean 10 argued that the mutually agreed upon contract terms are memorialized in the unsigned finalized contract. In contrast, LRHA contended that the contract terms are set by the purchase orders.

The record shows as a matter of law that the binding contract terms between Ocean 10 and LRHA were set by the phase 1 and phase 2 purchase orders and LRHA’s notice to proceed. The unsigned sample subscription contract and finalized contract do not provide binding contract terms between the parties.

Turning to breach, Ocean 10 claims that LRHA materially breached the contract by failing to pay its full annual subscription payment for the remaining terms on both phase 1 and phase 2 purchase orders and for voiding the contract before its three-year subscription ended. LRHA argues that it lawfully voided the contract under the Virginia Public Procurement Act, or VPPA.

Under the VPPA, a public body may void a contract if it finds that doing so is in the public’s best interest. Once a public body has voided a contract, the extent of its damages for voiding this contract after performance has begun is based on whether a fact finder determines that the contract award was arbitrary or capricious. Because a jury might conclude that the contract was arbitrary or capricious based on these alleged violations, the issue of whether the security services contract was arbitrary or capricious will be decided by the jury at trial.

LRHA’s MSJ

LRHA moves for partial summary judgment, arguing (1) that Ocean 10’s claims of breach of contract and administrative denial are barred under the VPPA because it lawfully voided the contract and (2) that it is entitled to its affirmative defense of Ocean 10’s failure to mitigate damages. As to its first issue, LRHA was permitted to void the contract under the VPPA, but the issue of whether the contract was arbitrary or capricious will be decided by the jury at trial for the reasons discussed above. As to its second issue, the record reflects a genuine dispute of material fact on whether Ocean 10 failed to reasonably mitigate its damages.

Expert

LRHA retained Mr. Siegler to provide an appraisal of the TSUNAMI systems and its components. Ocean 10 first argues that Mr. Siegler’s appraisal is irrelevant since this case is about a services agreement, not a sale of goods agreement. However Mr. Siegler’s appraisal is relevant to LRHA’s defense that Ocean 10 failed to reasonably mitigate its damages.

Ocean 10 next argues that Mr. Siegler’s analysis is not “the product of reliable principles and methods.” This argument fails. Even though Mr. Siegler did not appraise every component of a TSUNAMI system, his opinions were based on reliable principles and methods. Ocean 10’s disputes with his expert testimony go to the weight, rather than its admissibility.

Plaintiff’s motion for summary judgment granted in part, denied in part. Defendant’s motion for partial summary judgment denied. Plaintiff’s motion to exclude denied.

Ocean 10 Security LLC v. Lynchburg Redevelopment and Housing Authority, Case No. 6:22-cv-00007, May 18, 2023. WDVA at Lynchburg (Moon). VLW 023-3-266. 18 pp.