Mary Kate HealySteve McBrady

On February 12, 2015, the Federal Circuit issued an opinion in K-CON Building Systems, Inc. v. United States, addressing jurisdiction over contractor claims under the Contract Disputes Act (“CDA”).

Specifically, K-CON Building Systems explores the implications of claim identification, and whether a contractor can add a new claim to a pending matter when the new claim seeks a different remedy or is based upon a different legal theory.  In this case, K-CON Building Systems, Inc. (“K-CON”) contracted with the federal government to construct a “cutter support team building” for the U.S. Coast Guard.  The contract included a liquidated damages clause and obligated K-CON to pay $589 for each day of delay.  When K-CON completed the building 186 days after the contract’s completion date, the Coast Guard withheld $109,554 in liquidated damages due to alleged delay.

K-CON initially contested the assessment of the liquidated damages, and submitted a July, 2005 letter to the CO requesting that the government remit the liquidated damages on two grounds: first, that the liquidated damages clause was unenforceable as an impermissible penalty, and second, that the government failed to provide extensions to the completion date necessitated by changes to the contract.  The contracting officer denied K-CON’s request and K-CON appealed to the COFC.  As litigation progressed, K-CON again wrote to the CO in December, 2006, asserting a third claim for relief against the Coast Guard (alleging that contract changes entitled K-Con to additional monetary relief). K-CON subsequently amended its COFC complaint to include this claim when the CO denied this request for additional compensation. Although each letter relied on the changes clause, K-CON requested different relief. The July, 2005 letter requested remission of liquidated damages because the government failed to permit time extensions necessitated by the contract changes, whereas the December, 2006 letter (the third claim) requested additional compensation for extra work performed due to the contract changes.

At the COFC, the parties disputed whether the Court had jurisdiction over the third claim. The government argued that the contracting officer could not issue a final decision on K-CON’s December, 2006 letter (the third claim) because the July, 2005 letter (the second claim) also contained a contract-changes claim, and that matter was already in litigation at the COFC.   The COFC disagreed, and held that it had jurisdiction over the third claim.

On appeal, Federal Circuit affirmed the COFC.  Relying on the difference between the requested remedies in the July, 2005 and December, 2006 letters, the Federal Circuit held that the difference in remedy rendered the claims distinct: “the remedy requested in the two documents is categorically different: the original complaint asks for remission of liquidated damages, whereas the second letter asks for compensation for extra work performed. That is enough to make the requests different claims.”

In its decision, Federal Circuit emphasized that K-CON presented three distinct claims and detailed the requested remedy for each. First, K-CON asserted in the July, 2005 letter that the liquidated damages clause was unenforceable and requested remission of the liquidated damages clause. Second, K-CON asserted in the July, 2005 letter that it was entitled to time extensions due to contract changes and requested remission of the liquidated damages clause. Third, K-CON asserted (in the December, 2006 letter) that it performed additional work under the contract due to contract changes and requested additional compensation..

From a jurisdictional standpoint, the key takeaways from K-Con is that a contractor can amend its Complaint at the COFC to add new claims related to the claim on appeal if the new claims either request different remedies (whether additional compensation, remission of funds, or non-monetary relief) or assert grounds that are materially different from each other.  This holding may prove helpful to contractors who identify additional bases for recovery or remedies after initiating CDA litigation; however, the Court also held that by waiting more than 2 years to assert its claim, K-Con had failed to provide adequate notice of alleged constructive changes to the Government, distinguishing the facts in K-Con from those in a number of prior cases typically holding that notice provisions should not be strictly enforced.