Hinckley Allen obtained a successful summary judgment ruling for Schneider Electric Buildings Americas, Inc. The Court of Federal Claims ruled that Schneider was wrongfully terminated by the United States Department of Agriculture (USDA) from an energy savings project in Albany, California. The project involved a unique federal contract, known as an energy savings performance contract (ESPCs). Under this type of contract, the contractor pays for the upfront costs of installing energy conservation measures (ECMs) at the government facility, and the government repays the contractor over time from the measured annual energy savings it receives. This allows the government to, as the Department of Energy puts it, “pay for today’s facility upgrades with tomorrow’s energy savings.”
Schneider installed over $13 million in ECMs, which with financing costs, created a $23 million obligation for the USDA to repay for a 23-year repayment term. Despite having accepted the ECMs, and receiving the guaranteed energy savings, the USDA withheld the fifth and sixth annual payments due at the start of 2019 and 2020 (later only partially paying them). In July 2020, the USDA, as the Court found, “took the drastic decision of terminating Schneider for default after receiving 91.45% of the value of the contract.”
Our attorneys were involved even before the termination, when the USDA began sending show cause notices to Schneider. Relying on the terms of the contract, Hinckley Allen was able to secure victory for Schneider on summary judgment, saving the time and expense of a trial. In holding that the termination was wrongful, the Court cautioned the Government: “The party that hastily diverts from the path provided by the contract’s terms is bound to meet its destiny on the road it took to avoid it.”
The Court found that Schneider had substantially complied with the specific goals of the contract – guaranteed energy savings – and the USDA’s basis for termination was not authorized under the contract. The Court also held that the USDA breached the contract for unilaterally withholding significant portions of the fifth and sixth progress payments.
The team representing Schneider was comprised of litigators in Hinckley Allen’s Construction and Commercial Litigation Groups in our Albany, New York and Hartford, Connecticut offices.
