A.L. Prime Energy Consultant, Inc.
Massachusetts Bay Transportation Authority No. 136376
March 4, 2017
MEMORANDUM OF DECISION AND ORDER ON DEFENDANT'S
MOTION TO DISMISS
Mitchell H. Kaplan, Justice of the Superior Court.
2016, defendant Massachusetts Bay Transportation Authority
(MBTA) terminated its two-year fuel supply agreement with
plaintiff A.L. Prime Energy Consultant, Inc. (Prime). The
MBTA explained that the termination was made pursuant to its
exercise of a contractual right that permitted termination
for convenience. The MBTA terminated the contract in order to
take advantage of cost savings it believed it could achieve
by purchasing fuel through the Commonwealth's existing
statewide fuel contract. Prime alleges that the MBTA abused
its discretion when it invoked the termination for
convenience provision and that therefore the MBTA is liable
for breach of contract and breach of the covenant of good
faith and fair dealing. The matter is now before the Court on
the MBTA's motion to dismiss pursuant to Mass.R.Civ.P.
12(b)(6). For the reasons that follow, the motion is
following facts are drawn from the allegations in Prime's
complaint, which are accepted as true for the purposes of
this motion, the exhibits attached to the complaint, and
matters of public record appropriate for judicial notice. See
Schaer v. Brandeis Univ., 432 Mass. 474, 477, 735
N.E.2d 373 (2000); Watterson v. Page, 987 F.2d 1,
3-4 (1st Cir. 1993).
January 15, 2015, the MBTA's Materials Management
Department issued an Invitation for Bids (IFB) for the supply
of Ultra Low Sulfur Diesel Fuel (ULSD). The IFB provided that
the contract would have a two-year term.
months later, the Operation Services Division of the
Commonwealth's Executive Office of Administration and
Finance (OSD), which is responsible for establishing
statewide contracts on behalf of state public purchasers,
issued a Request for Response (RFR) seeking bids for the
statewide supply of ULSD. The RFR divided the state into
eight zones based upon geographic proximity and requested
that bidders submit a price proposal for each zone with the
possibility that a separate contract could be executed for
each zone. The RFR specified that the initial term of the
contract between a successful bidder and the OSD would be one
year, with three options to renew of up to one year each.
Dennis Burke, Inc. was the successful bidder for zones 1, 2,
3, 5, and 6. It executed a contract to provide ULSD
to those zones on June 30, 2015 (the Statewide Contract).
1, 2015, Prime was awarded the contract to supply ULSD to the
MBTA in accordance with the MBTA's IFB (Prime
Contract). The contract contained a so-called
" termination for convenience" provision that
Termination for Convenience . The Authority [MBTA]
may, in its sole discretion, terminate all or any portion of
this Agreement or the work required hereunder, at any time
for its convenience and/or for any reason by giving written
notice to the Contractor [Prime] thirty (30) calendar days
prior to the effective date of termination or such other
period as is mutually agreed upon in advance by the parties.
If the Contractor is not in default or in breach of any
material term or condition of this Agreement, the Contractor
shall be paid its reasonable, proper and verifiable costs in
accordance with generally accepted government contracting
principals as set forth in the Federal Acquisition
Regulations, including demobilization and contract closeout
costs, and profit on work performed and Accepted up to the
time of termination to the extent previous payments made by
the Authority to the Contractor have not already done so.
Such payment shall be the Contractor's sole and exclusive
remedy for any Termination for Convenience, and upon such
payment by the Authority to the Contractor, the Authority
shall have no further obligation to the Contractor. The
Authority shall not be responsible for the Contractor's
anticipatory profits or overhead costs attributable to
Contract at § 5.29.3.
two weeks after the parties entered the Prime Contract, the
2015 Appropriations Act (Chapter 46 of the Acts of 2015)
became effective. The Act enacted a series of legislative
initiatives meant to reform the MBTA. Those reforms included
the creation of a Fiscal and Management Control Board (FMCB)
that was charged with, among other things, securing the
fiscal stability of the MBTA. The Act granted the FMCB a
three-year exemption (2015-2018) from the requirements in
G.L.c. 7, § § 52-55, the so-called Pacheco
Law. The Act also required the FMCB to
provide annual reports to the Legislature detailing the
outsourcing contracts that utilized the temporary exemption.
April 2016, the MBTA informed Prime that it was considering
purchasing ULSD under the Statewide Contract because it
believed this would result in cost savings. A few months
later, by letter dated July 12, 2016, the MBTA terminated the
Prime Contract pursuant to the contract's termination for
convenience provision so that it could participate in the
Statewide Contract. Prime challenged the MBTA's claims
that it would save money by switching to a new vendor and
contended that the MBTA's cost-savings rationale was not
a proper basis upon which to terminate the contract for
convenience. The MBTA did not rescind the termination.
September 1, 2016, the FMCB issued its first annual report as
required under the 2015 Appropriations Act. The report, in
addition to describing the contracts executed pursuant to the
exemption, indicated that the MBTA planned to participate in
statewide contracts to obtain better volume discounts. See
Annual Report at 9. A few days after the report was issued,
Prime filed the present lawsuit against the MBTA.
brings claims for breach of contract (Count I) and breach of
the implied covenant of good faith and fair dealing (Count
II). It asserts that termination for convenience clauses,
like the one in the Prime Contract, cannot be invoked for the
sole purpose of obtaining a better price from another
contractor. In consequence, the MBTA abused its discretion
when it terminated the Prime Contract so that it could
purchase ULSD under the Statewide Contract, allegedly at a
better price. In moving to dismiss the complaint, the MBTA
argues that " ...