New Federal Circuit Decision May Impact Contractor Defenses To Government Claims
On June 17, 2010, the Federal Circuit majority ruled in M. Maropakis Carpentry, Inc. v. U.S. that it had no jurisdiction over the contractor's defense, based on excusable delay, to the Navy's liquidated damages claim for late completion, because the contractor had not filed a fully compliant "claim" under the Contract Disputes Act "CDA" (41 U.S.C. §§ 601-613.) Contractors have thus been warned. They should consider carefully all anticipated defenses (and those already asserted?) to government claims (e.g., breach or other government actions that might excuse a default termination) to determine whether they must be recast, formalized, and properly submitted under CDA procedures -- with attendant cost and, likely, delay in dispute resolution.
In Maropakis, the contractor failed to complete a Navy facility renovation project in accordance with the contract schedule and alleged that the government caused much of the delay. During more than two years of correspondence, the Navy announced its intention to collect liquidated damages under the terms of the contract. The contractor initially filed a complaint for, among other things, time extensions to compensate for alleged Navy delays on the project, and the Navy counterclaimed for liquidated damages. The Federal Circuit affirmed a Court of Federal Claims decision that the plaintiff-contractor could not be heard on the government's ensuing counterclaim for liquidated damages for breach of the contract schedule, because the Court lacked jurisdiction until the contractor met CDA requirements for properly drafting and submitting a claim to the contracting officer: i.e. clear statement of basis for claim, request for CO final decision, certification.
The Maropakis majority relied on Sun Eagle Corp. v. United States, 23 Cl. Ct. 465 (1991) to characterize the plaintiff's position as a "claim for contract modification" instead of a "defense" against a government claim for liquidated damages. While the Maropakis court declined to provide much detail on its conclusion that the plaintiff was "claiming" and not "defending," the Sun Eagle case sheds some light possible ways to make the distinction. The Sun Eagle court stated that contractors could likely defend themselves against government liquidated damages claims without having to first submit for CDA-complaint claims, so long as the contractor did not claim for itself the liquidated damages sum assessed or any interest thereon. 23 Cl. Ct. at 482. The Maropakis plaintiff may have been more readily viewed as a "claimant" than a "defender," considering the claim for rescission of liquidated damages and interest in its initial complaint.
The Maropakis majority also relied, however, on Elgin Builders, Inc. v. United States, 10 Cl. Ct. 40 (1986), where the contractor was permitted to defend against a government liquidated damages claim without filing a CDA-complaint claim of its own, but only to the extent of denying any delay in completion: "However, if plaintiff intends -- in connection with its contest of the assessment -- to raise any issue of relief to which it might be entitled, such as the contractor's claim of entitlement to time extensions, such claims must first be presented to the CO for his decision and this court will not consider such claims until that has been accomplished." Id. at 44. In short, Maropakis apparently confirms strict procedural requirements on contractor defenses that could be asserted as claims, probably even if not advanced as claims for money.
The Maropakis opinion was delivered over a spirited dissent, which steadfastly refused to view a contractor's objection to a government claim for liquidated damages as a "claim" subject to a jurisdictional bar. And, more basically, the dissent expressed grave concern---even quoting President Lincoln in the process---that the majority's decision to grant the government's motion for summary judgment on its liquidated damages claim, denied the contractor the basic right to defend itself.
