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Flatland Realty, LLC, ASBCA No. 63409, the Armed Services Board of Contract Appeals (Board) granted an appeal seeking damages, plus interest, from an improper termination for default.  In an uncommon result, the Board awarded lost profit expectancy damages because the government had improperly terminated the contract, which did not incorporate a termination for convenience clause.

The underlying contract was a 15-year lease by the government to the contractor for the operation of a concession.  The lease included a five-year Use and Development Plan (UDP). When the parties failed to reach agreement on a new UDP after the UDP’s fifth year, the government terminated Flatland for default.

On appeal, Flatland challenged the propriety of the termination for default.  Flatland claimed that no lease provision required the submission of a new UDP, nor did any portion of the lease indicate that the UDP expired after five years.  The Board agreed, finding that the government’s decision to terminate for default was unjustified.  Moreover, there was no termination for convenience clause in this lease agreement (ostensibly because leases to contractors are not FAR-covered “acquisitions” using appropriated funds, despite being covered by the CDA as a “disposal” of government personal property).  Since the traditional termination clauses were absent, the government lacked the typical contract protection that would have converted an improper default termination into a termination for convenience.  As such, the Board held that the government’s improper termination for default constituted a breach of the contract.  Because the government breached, the Board awarded Flatland lost profit expectancy damages.

Both the contract and holding are atypical, but worth noting.  Under the G.L. Christian doctrine, mandatory FAR clauses that are not included in a contract can be read into the contract by operation of law.  Here, because the lease was not FAR covered, the termination for convenience clause was not required and the Board did not read one in.  Thus, the government’s improper default termination was a breach of the agreement and the contractor could recover lost profits—which generally are not recoverable under a FAR-based termination for convenience.

This decision highlights the importance of understanding the particular contractual vehicle being employed by the government, which can impact the range of recoverable damages in the event of a government breach.

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Photo of Steve McBrady Steve McBrady

Steve McBrady is a partner and co-chair of Crowell & Moring’s Government Contracts Group. He also serves as a member of the firm’s Finance and Strategic Growth Committees, where he has played a leading role in expanding client service offerings throughout the U.S.…

Steve McBrady is a partner and co-chair of Crowell & Moring’s Government Contracts Group. He also serves as a member of the firm’s Finance and Strategic Growth Committees, where he has played a leading role in expanding client service offerings throughout the U.S., Europe, Asia, and the Middle East.

In recent years, Steve has received the National Law Journal’s “Winning Litigator” award as a lawyer who has “tackled some of the most widely watched cases of the year,” as well as the “D.C. Trailblazer” award, recognizing lawyers who have “made significant marks on the practice.” In 2018, he was named “Government Contracts MVP” by Law360.

Photo of Skye Mathieson Skye Mathieson

Skye Mathieson is a partner in the Government Contracts Group in Crowell & Moring’s Washington, D.C. office. He works with and advises clients from diverse industries on a wide array of matters, including contract performance disputes (CDA claims and equitable adjustments), cost allowability…

Skye Mathieson is a partner in the Government Contracts Group in Crowell & Moring’s Washington, D.C. office. He works with and advises clients from diverse industries on a wide array of matters, including contract performance disputes (CDA claims and equitable adjustments), cost allowability issues, defective pricing, fiscal law questions, prime-sub disputes, bid protests, internal investigations, and responding to DCAA audits. Prior to joining Crowell & Moring, Skye spent several years as a trial attorney at the procurement litigation division of the Air Force Headquarters for Legal Operations, where he pioneered the seminal “Laguna Defense” that is now widely raised and litigated at the Boards of Contract Appeals.

Skye has extensive experience litigating cases before the Armed Services Board of Contract Appeals (ASBCA), the Civilian Board of Contract Appeals (CBCA), the Government Accountability Office (GAO), and the Small Business Administration (SBA). Through this litigation, Skye has gained valuable experience in a wide variety of industries, such as aerospace (fighter jets, satellites, refueling tankers, simulators, and counter-measures), information technology and software development, construction, healthcare services, intelligence gathering, battlefield services and logistics, scrap disposal, base maintenance and repair contracts, and many others.

Skye also has experience counseling and litigating on a broad range of legal issues, including defective pricing, cost disallowances, contract terminations, unique commercial item issues, constructive changes, differing site conditions, statute of limitations problems, CDA jurisdictional hurdles, contract fraud, Government superior knowledge, unabsorbed overhead and Eichleay damages, CICA stays and overrides, and small business issues.

Having advocated and litigated on behalf of both the government and contractors, Skye has unique insights into both parties’ perspectives that he leverages when exploring and negotiating settlements or other avenues for alternative dispute resolution (ADR). Where settlements are not possible, Skye embraces opportunities for courtroom advocacy. He has significant trial experience examining both expert and fact witnesses on both direct and cross examination, as well as taking and defending depositions, drafting hearing briefs and dispositive motions, and managing millions of pages of document production.

Skye is an active member of the government contracts community. He is the editor-in-chief of the BCA Bar Journal, a quarterly publication of the Boards of Contract Appeals Bar Association, which allows him to work alongside judges, government attorneys, and in-house counsel in the production of each issue. He is also a member of the ABA Section of Public Contract Law.

Photo of John Nakoneczny John Nakoneczny

John Nakoneczny is an associate in the Government Contracts Group in Crowell & Moring’s Washington, D.C. office.

John represents and counsels contractors from diverse industries on contract disputes and other government contract matters. Prior to joining Crowell & Moring, he clerked at the…

John Nakoneczny is an associate in the Government Contracts Group in Crowell & Moring’s Washington, D.C. office.

John represents and counsels contractors from diverse industries on contract disputes and other government contract matters. Prior to joining Crowell & Moring, he clerked at the Civilian Board of Contract Appeals, where he supported its judges in resolving and mediating appeals under the Contract Disputes Act. John earned his J.D. from The George Washington University Law School, where he was the president of the Government Contracts Student Association and on the Federal Circuit Bar Journal. While in law school, John served as a legal intern at the U.S. General Services Administration and the Fraud Section of the U.S. Department of Justice, Criminal Division. Upon graduation, John was awarded the President’s Volunteer Service Award.