Justia U.S. Federal Circuit Court of Appeals Opinion Summaries

The Army Corps of Engineers awarded Ikhana a contract to build a Pentagon facility by October 12, 2015. Ikhana procured required performance and payments bonds from GCNA, which required Ikhana to execute a general indemnity agreement, including a provision that assigned GCNA all rights under the contract if Ikhana defaulted or if GCNA made a payment on any bond. Each time Ikhana discovered a new worksite problem, it had to halt work until the Corps issued a unilateral contract change, causing significant delays and cost overruns. One modification required a power outage at the Pentagon, but the Corps never scheduled the outage. By mid-October 2015, construction stopped; Ikhana submitted claims seeking additional compensation and an extension of the deadline. Ikhana’s sub-contractors filed claims against GCNA’s bond. The Corps terminated Ikhana and made a claim on the bond. Ikhana appealed the termination and its claims to the Armed Services Board of Contract Appeals. GCNA and the Corps negotiated for GCNA to tender a completion contractor. GCNA invoked the indemnity agreement and entered into a settlement with the Corps then sought a declaratory judgment that the agreement authorized it to settle Ikhana’s dispute with the Corps and dismiss the Board appeal. The district court stayed GCNA’s action pending resolution of Ikhana’s Board appeal. The Federal Circuit affirmed the denial of GCNA’s motion to intervene and withdraw Ikhana’s Board appeal. GCNA lacked standing. A party seeking to supplant the plaintiff must be able to show that it could have initiated the complaint on its own. GCNA’s settlement agreement with the Corps, even if it constitutes a takeover agreement, does not entitle GCNA to assert claims that arose before the settlement. View "Guarantee Co. of North America USA v. Ikhana, LLC" on Justia Law

In 2005, Raytheon submitted its 2004 incurred cost rate proposal for a Cost-Plus-Fixed-Fee contract for engineering services associated with the Patriot Weapons system. Raytheon’s Corporate Controller certified that all included costs "are allowable in accordance with the cost principles of the [FAR] and its supplements applicable to the contracts to which the final indirect cost rates apply; and (2) This proposal does not include any costs which are expressly unallowable under applicable cost principles of the FAR." The Defense Contract Audit Agency reviewed the proposal and concluded that it contained expressly unallowable costs. In 2011 a Corporate Administrative Contracting Officer of the Defense Contract Management Agency (DCMA) issued a final decision determining that Raytheon’s proposal included, among other expressly unallowable costs, over $220,000 of expressly unallowable lobbying salary costs. The contracting officer demanded that Raytheon repay the government for these reimbursed expressly unallowable costs, and assessed penalties and interest under Federal Acquisitions Regulation (FAR) 42.709-1(a)(1). Although Raytheon admitted that salary costs associated with lobbying are unallowable and that it committed cost errors or omissions in its calculations, Raytheon argued that salaries were not specifically referenced in Subsection 22 and, accordingly, were not “expressly unallowable.” The Armed Services Board of Contract Appeals and Federal Circuit affirmed, finding that the lobbying costs are subject to penalty because salary costs for lobbying activities are expressly unallowable under FAR 31.205-22. View "Raytheon Co. v. Secretary of Defense" on Justia Law

In 1983-1984, the Farmers Home Administration issued apartment owners (Appellants) 50-year loans to provide low-income housing under 42 U.S.C. 1485. A promissory note provided that prepayments “may be made at any time at the option of the Borrower.” The mortgage stated that the loan must be used in compliance with the statute and that Appellants must use the property for low-income housing for 20 years before they could prepay and exit the program. The documents were contemporaneously executed and cited each other. The Emergency Low Income Housing Preservation Act of 1987 and Housing and Community Development Act of 1992 provided that borrowers could no longer prepay after the 20-year period but must notify FmHA’s successor, which was to make “reasonable efforts" to extend the low-income use,” 42 U.S.C. 1472(c)(4)(A). If the agreement is not extended, the borrower must attempt to sell the property at fair market value to a nonprofit organization or a public agency. Appellants rejected incentive offers and, in 2009-2010, unsuccessfully marketed their properties for the required period. Facing foreclosure and low occupancy due to high unemployment, Appellants submitted deeds in lieu of foreclosure, then filed suit. The Federal Circuit reinstated certain claims. In transferring deeds to the government, Appellants did not assign away their accrued claims for breach of the prepayment right. The Claims Court properly dismissed a contract-based Fifth Amendment “takings” claim. In entering contracts, the government acts in its commercial capacity and remedies arise from the contracts themselves, rather than from constitutional protections. Appellants can succeed under a theory premised on their property interests in the land and buildings before entering the contracts. View "Callaway Manor Apartments v. United States" on Justia Law

Section 515 of the Housing Act of 1949, 42 U.S.C. 1485, authorizes the Department of Agriculture, Farmers Home Administration to loan money to nonprofit entities to provide rental housing for elderly and low- and moderate-income individuals and families. Sonoma, a limited partnership contracted with the government to construct low-income housing in exchange for a $1,261,080 Section 515 loan. In 2010, Sonoma submitted a written request to prepay the balance of its loan. The government denied the request. Sonoma sued for breach of contract, including a claim for a “tax neutralization payment” to offset the negative tax consequences of a lumpsum damages award. The Claims Court awarded Sonoma expectancy damages of $4,223,328 and a tax gross-up award of $3,171,990. The Federal Circuit vacated. The Claims Court clearly erred in using the income from a single tax year to predict the future rates at which each partner would pay taxes. While the government’s breach created the circumstances that require consideration of future income and tax rates, Sonoma is not absolved of its burden of showing an income-tax disparity and justifying any adjustment. View "Sonoma Apartment Associates v. United States" on Justia Law

The Federal Reserve Act of 1913 established a system that includes the Federal Reserve Board of Governors and 12 regional Reserve Banks. The Board exercises broad regulatory supervision over the Reserve Banks, which serve as banks to the U.S. government and to commercial banks who are members of the Federal Reserve System. The Act set the statutory rate for dividend payments on Federal Reserve Bank stock at six percent per year, which remained in effect until 2016, when an amendment (12 U.S.C. 289(a)(1)) effectively reduced the dividend rate for certain stockholder banks to a lower variable rate. Plaintiffs argued that banks that subscribed to Reserve Bank stock before the amendment are entitled to dividends at the six percent rate and that, by paying dividends at the amended rate, the government breached a contractual duty or effected a Fifth Amendment taking. The Federal Circuit affirmed the dismissal of the suit. There is no “clear indication” of the government’s intent to contract in either the language of the Federal Reserve Act or the circumstances of its passage. Plaintiffs did not allege a legally cognizable property interest arising from its “statutory rights” and the requirement that member banks subscribe to reserve bank stock under the Act does not constitute a regulatory taking. View "American Bankers Association v. United States" on Justia Law

The Moodys leased Pine Ridge Indian Reservation parcels for agriculture. The government has a trust responsibility for Indian agricultural lands, 25 U.S.C. 3701(2). The Secretary of the Interior is authorized to participate in the management of such lands, with the participation of the beneficial owners and has delegated some responsibilities to the Bureau of Indian Affairs (BIA). BIA regulations generally allow Indian landowners to enter into agricultural leases with BIA approval. Each Moody lease defined “the Indian or Indians” as the “LESSOR.” The Claims Court concluded that the Oglala Sioux Tribe signed the leases. Other lease provisions distinguished between the lease parties and the Secretary of the Interior/United States. Issues arose in 2012. The BIA sent letters canceling the leases, noting that the Moodys could appeal the decision to the Regional Director. Within the 30-day appeal period, the Moodys returned with a cashier’s check in the proper amount, which the BIA accepted. The BIA informed the Moodys that they need not appeal, could continue farming, and did not require written confirmation. Subsequently, the Moodys received trespass notices and were instructed to vacate, which they did. The Moodys did not appeal within the BIA but sued the government. The Federal Circuit affirmed the Claims Court’s dismissal of the written contract claims for lack of jurisdiction because the government was not a party to the leases, for failure to state a claim upon which relief could be granted because the Moodys did not have implied-in-fact contracts with the government, and for failure to raise a cognizable takings claim because their claim was based on the government’s alleged violation of applicable regulations. View "Moody v. United States" on Justia Law

Under a 2011 contract with the U.S. Army Corps of Engineers (USACE), HHL was to provide transportation services in Afghanistan. After the contract expired, HHL requested additional compensation based on alleged contract violations: suspension of work, changes to the contract requirements, and termination of the original contract. After various preliminary submissions, HHL submitted a “Request for Equitable Adjustment (REA)” with a sworn statement by HHL’s Deputy Managing Director having “full management [authority].” The submission requested that it be “treated as a[n] REA,” not as a claim, and requested $4,137,964 in compensation. HHL’s request was denied in what the contracting officer characterized as the “Government’s final determination in this matter.” The Armed Services Board of Contract Appeals concluded that it did not have jurisdiction because “[a]t no point, in six years of communication with the [USACE], has HHL requested a contracting officer’s final decision” under 41 U.S.C. 7103(a)(1). The Federal Circuit reversed and remanded, concluding that there was a request for a final decision by a contracting officer and a final decision entered by the contracting officer. A defect in the certification of a claim does not preclude jurisdiction over the claim; HHL can cure any issues with its certification on remand. View "Hejran Hejrat Co. Ltd v. United States Army Corps of Engineers" on Justia Law

From 1943-1990, the government produced plutonium for nuclear weapons at Washington’s Hanford Site, leaving behind 56 million gallons of nuclear waste in underground tanks. In 2000, Bechtel was awarded a cost-plus-incentive-fee contract by the Department of Energy (DOE) for the design, construction, and operation of a Hanford nuclear waste treatment plant, incorporating provisions of the Federal Acquisition Regulation (FAR). During the contract’s performance, two former Bechtel Hanford employees sued Bechtel under 42 U.S.C. 1981, alleging sexual and racial discrimination and retaliation. Bechtel settled these lawsuits and sought $500,000 in reimbursement from DOE for its defense costs. The settlement payments were covered by insurance. DOE provisionally approved Bechtel’s request and reimbursed Bechtel as requested. A contracting officer later disallowed the costs, citing Federal Circuit precedent, “Tecom” and stating that the government would offset the provisional reimbursement from future amounts owed to Bechtel. The Claims Court granted the government summary judgment, concluding that Tecom provided the proper standard. The Federal Circuit affirmed. The Bechtel contract incorporated FAR 31.201-2 and 52.222-26, the same provisions that barred reimbursement in Tecom. Under the Tecom standard, Bechtel’s defense costs related to the discrimination suits are only allowable if Bechtel can show that the former employees “had very little likelihood of success.” Bechtel did not challenge the contracting officer’s determination that the former employees’ claims had more than a very little likelihood of success. View "Bechtel National, Inc. v. United States" on Justia Law

Under the Medicare administrative contractor (MAC) program, 42 U.S.C. 1395kk1, the Centers for Medicare & Medicaid Services (CMS) use contractors to administer Medicare claims and benefits. CMS must use competitive procedures when entering into contracts with MACs, taking into account performance quality, price, and other factors. In 2010, CMS prepared solicitations to replace the original MAC contracts and implemented a policy in the solicitations for several jurisdictions, placing a limit on the amount of MAC contract responsibility that any single entity could win in a prime contractor capacity. CMS would not award more than 26% of the national A/B Medicare workload to any single contractor or more than 40% of the national A/B Medicare workload to any one set of affiliates. An “Exception” stated that, for the sake of continuity of service, CMS retained the discretion to award a particular prime contract to a particular contractor, even where doing so would exceed the policy workload. Because of the policy, with NGS’s current contracts, NGS cannot win the MAC contract for Jurisdiction H. NGS filed a pre-award protest. The Government Accountability Office rejected the protest. The Claims Court affirmed. The Federal Circuit reversed. The policy precludes “full and open competition through the use of competitive procedures,” 41 U.S.C. 3301(a)(1). Congress outlined the circumstances under which an agency may avoid the full and open competition requirement. The court rejected the government’s argument that the workload caps fall within an exception for “procurement procedures otherwise expressly authorized by statute.” View "National Government Services, Inc. v. United States" on Justia Law

The Virgin Islands is a U.S. territory that can set and receive proceeds from duties, Virgin Islands Port Authority (VIPA) is authorized to “determine, fix, alter, charge, and collect reasonable rates, fees, rentals, ship’s dues and other charges.” Since 1968, VIPA has set wharfage and tonnage fees for Virgin Islands ports. Customs collected those fees from 1969-2011, deducting its costs. The remaining funds were transferred to VIPA. In 1994, the Virgin Islands and Customs agreed to “the methodology for determining the costs chargeable to [the Virgin Islands] . . . for operating various [Customs] activities.” The agreement cited 48 U.S.C. 1469c, which provides: To the extent practicable, services, facilities, and equipment of agencies and instrumentalities of the United States Government may be made available, on a reimbursable basis, to the governments of the territories and possessions of the United States. Customs increased collection costs, which outpaced the collection of the disputed fees starting in 2004, leaving VIPA without any proceeds. After failed efforts to resolve the issue, VIPA notified Customs in February 2011, that VIPA would start to collect the fees in March 2011. VIPA sued Customs to recover approximately $ 10 million in disputed fees that Customs collected from February 2008 to March 1, 2011. The Federal Circuit affirmed a judgment in favor of Customs. Customs had authority to collect the disputed fees during the time at issue under the 1994 agreement, in combination with 48 U.S.C. 1469c. View "Virgin Islands Port Authority v. United States" on Justia Law