As we discussed during Crowell & Moring’s webinar last week Top Headlines, Headaches, and Developments for Government Contractors to Watch in 2015, the CDA’s six-year statute of limitations has been a hot topic for both contractor and Government claims over the past several years.
Until recently, the case law at the Federal Circuit, the Boards, and the Court of Federal Claims was unanimous that the statute of limitations was jurisdictional. That meant that claims that accrued more than six years prior to their assertion would be null and void – contractors and the Government could not waive or toll the statutory deadline, and the tribunals had no jurisdiction to hear cases based on untimely claims.
Under this prior state of the law, the cases focused almost exclusively on when a claim “accrued” – i.e., when the Government or the contractor “knew or should have known” about the claim, which started the clock on their obligation to assert it within six years. Thus, in the case of incurred cost submissions (ICS), for example, the clock was determined to begin running as of the submission of the ICS. Similarly, with Accounting Changes, the clock began running six years from the submission of a notification, as long as that notification is accompanied by a cost impact analysis. On contractor claims, cases have presented detailed factual analysis of when the company “should” have known that it had a claim.
In December 2014, the Federal Circuit’s Sikorsky decision (previously discussed here) changed the case law on the CDA statute of limitations, in ways likely to have a ripple effect throughout 2015. In Sikorsky, the Court held that the CDA statute of limitations is “not jurisdictional” and “need not be addressed before deciding the merits.”
So what does that mean? First, the decision does not change the substantive law on the CDA statute of limitations – i.e., the familiar “known or should have known” standard for claim accrual. But, if the statute of limitations is not jurisdictional, it now can be tolled by agreement of the parties – or even waived. This means that the parties can avoid potentially unnecessary litigation if it is in their mutual interest to do so. For example, some incurred cost disputes based on protracted DCAA Audits, may be tolled if the contractor and DCMA can agree to a tolling agreement.
Procedurally, it also means that the Government or the contractor will have to assert the CDA statute of limitations as an affirmative defense – we will not see Motions to Dismiss claims on jurisdictional grounds. Instead if one side has a “clear winner” on statute of limitations, it is now most likely to be raised on Summary Judgment.
The main takeaway right now from Sikorsky is that there may be opportunities to avoid litigation that is occurring only because one party has to assert its CDA claim or else lose it. That may be good in the sense that companies would not have to litigate some purely statute of limitations-driven claims.
But there is an open question as to how cases with an SOL component will be resolved at the trial level, where the facts are not black and white – “close call” cases – and whether doctrines like equitable tolling, which was very difficult under the previous framework, will get another look from the courts.
One thing is for certain – the fallout from Sikorsky’s statute of limitations ruling will be something to watch in 2015.