Public Contract Law Journal

Federal Circuit Year-In-Review 2016 — Knowledge before Wisdom

by Tara L. Ward, Gary S. Ward, Kendra P. Norwood, Margaret E. Matavich, Moshe B. Broder & Cara L. Lasley
Federal Courts

Federal Courts

Tara L. Ward (tward@wileyrein.com), J.D., 2009, The George Washington University Law School; A.B., 2003, Princeton University. Gary S. Ward (gsward@wileyrein.com), J.D., 2013, The George Washington University Law School; B.A., 2010, University of California, San Diego. Kendra P. Norwood (knorwood@wileyrein.com), J.D., 2011, Georgetown University Law Center; M.P.P., 2000, Harvard University; B.A., 1997, Southern Univer- sity and A&M College. Margaret E. Matavich (mmatavich@wilenyrein.com), J.D., 2014, The George Washington University Law School; B.A., 2011, Miami University. Moshe B. Broder (mbroder@wileyrein.com), J.D., 2015, Georgetown University Law Center; B.A., 2011, Yeshiva University. Cara L. Lasley (clasley@wileyrein.com), J.D., 2015, Georgetown University Law Center; B.A., 2012, University of Oklahoma. The authors are attorneys in the Government Contracts practice at Wiley Rein LLP in Washington, D.C.

I.  Introduction

Knowledge speaks, but wisdom listens.1

In 2016, as in past years, the U.S. Court of Appeals for the Federal Circuit heard a number of government contract cases involving a diverse set of legal issues. This year, the court considered everything from jurisdictional issues, to proof of economic harm, to the meaning of contract terms and clauses, to the applicability of government contract principles to non-traditional contract vehicles, and much more in between. Each case teaches us something —  newfound knowledge we can mull over and try to interpret. Greater, long- lasting wisdom as to the overall meaning and import of these cases, however, remains just out of reach; we are left waiting, listening, for wisdom.

To be sure, several patterns emerge in the Federal Circuit’s jurisprudence from this year. For example, a review of 2016 decisions shows that, more often than not, in cases involving contract claims and disputes, the Federal Circuit affirmed the decisions of the boards of contract appeals and the Court of Federal Claims (CoFC). As shown in the more detailed discussion of the cases provided herein, however, merely identifying and articulating this pattern is of little practical value. The real kernels of knowledge come from the decisions themselves.

We can observe, for example, that the Federal Circuit affirmed three decisions by the Armed Services Board of Contract Appeals (ASBCA or the Board), while reversing only one. In DG21, LLC v. Mabus,2 for example, the Federal Circuit agreed with the ASBCA’s determination that, where a firm fixed-price contract stipulated that a pricing element was subject to prevailing market rates, the contractor bore the risk of rate fluctuations and was therefore not entitled to an equitable adjustment. In SUFI Network Services v. United States,3 the Federal Circuit affirmed the ASBCA’s decision in a Wunderlich Act4 case, dismissing a government appeal of a $113 million judgment even though the underlying ASBCA decision had been altered by litigation in the federal courts. Finally, in Laguna Construction Company v. Carter,5 the Federal Circuit affirmed the ASBCA’s decision granting the government’s motion for summary judgment on the ground that Laguna committed a prior material breach of the contract.

We can also note that the Federal Circuit affirmed five separate CoFC decisions on contract claims and disputes. In the first of two more traditional government contract cases, Northrop Grumman Computing Services, Inc.,6 the Federal Circuit agreed with the CoFC’s determination that Northrop failed to show harm resulting from its claim that the government breached its contract. Similarly, in Zafer Taahhut Insaat ve Ticaret A.S. v. United States,7 the Federal Circuit affirmed the CoFC’s decision that the contractor had not and could not establish that the government constructively changed the contract.

The Federal Circuit agreed with the CoFC’s analysis of more unique contract administration issues, too. Indeed, in Pacific Gas & Electric Co. v. United States,8 the Federal Circuit considered the bounds of contract privity in affirming the CoFC’s decision that the State of California and several California power companies lacked standing to sue the federal government for breach of contract. In Liberty Ammunition, Inc. v. United States,9 primarily a patent infringement case, the Federal Circuit concurred that, contrary to the plaintiff ’s argument, a government official did not breach a non-disclosure agreement. Finally, in Frankel v. United States,10 the Federal Circuit affirmed the CoFC’s determination that the limitation of liability provision in a “prize competition” contest precluded the plaintiff ’s breach of contract action.

But where do these observations get us? We cannot say that grouping these cases together somehow provides some overarching wisdom regarding how the Federal Circuit will decide the next contract claim that comes before the court; there are too many variables — too many unknowns — to make any sweeping prediction based on the outcome of claims decisions this year.

Indeed, not every case involving a claim was affirmed. In Guardian Angels Medical Service Dogs, Inc. v. United States,11 the Federal Circuit rejected the CoFC’s determination that Guardian’s challenge to the government’s termination for default was time-barred. According to the Circuit, the CoFC applied the wrong standard for determining whether the Contracting Officer’s (CO) decision should be treated as final. The Federal Circuit similarly disagreed with the ASBCA’s decision on statute of limitation grounds in Kellogg Brown & Root Services, Inc. v. Murphy.12 There, the Federal Circuit reversed and remanded the case to the ASBCA, holding that the Army could not preclude the claim on statute of limitations grounds when it would not allow KBR to seek reimbursement until resolving the underlying subcontractor dispute.

The so-called pattern similarly does not hold in Hymas v. United States,13 System Fuels, Inc. v. United States,14 or Rocky Mountain Helium, LLC v. United States.15 In Hymas, the Federal Circuit reversed the CoFC’s decision that it had jurisdiction over a protest action concerning non-procurement instruments — namely, agreements characterized as “cooperative agreements.” In System Fuels, Inc., a spent nuclear fuel case, the Federal Circuit reversed the CoFC’s decision, holding that the plaintiffs were entitled to the damages for loading the material into the storage canisters and casks. Ultimately, Rocky Mountain presents what may be the best example of the futility of seeking clarity in the apparent pattern. In that decision, the Federal Circuit agreed with the CoFC on one holding, disagreed on the next, and ultimately remanded the case to the CoFC for additional proceedings.

Not to mention that the court also decided non-breach of contract claims. In Per Aarsleff A/S v. United States,16 a bid protest action, the Federal Circuit parted ways with the CoFC, holding that the contracting agency did not violate the terms of the solicitation notwithstanding an ambiguity in one of the solicitation provisions. The Federal Circuit disagreed with another of the CoFC’s protest decisions in Coast Professional, Inc. v. United States.17 There, the Federal Circuit disagreed with the lower court’s determination that it lacked jurisdiction to consider a protest of a General Services Administration (GSA) Federal Supply Schedule (FSS) award-term extension, distinguishing between the government’s exercise of an option and the government’s issuance of a task order.

This is not to say that no wisdom can be gained from this year’s cases. Quite the contrary. Through these opinions, we gain ample knowledge about the Federal Circuit’s approach to more traditional government contracts issues such as risk allocation, constructive change, statutory bars to lawsuit, and prejudice. We also gain reference points where there are few uniquely postured cases and cases challenging non-traditional, e.g., government contracts and competitions. The sheer number and variety of decisions the Federal Circuit made on claims this year adds considerable depth to the court’s ever-growing precedent, which will help future litigants navigate the next disputes that come before the Circuit.

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