Federal contractor’s “Catch-22” leads to dismissal

Last week, a federal contractor, Avant Assessment, LLC, found themselves in a Catch-22. Avant had filed a complaint at the Court of Federal Claims renewing a previous claim on new information. Avant earned an early tactical win when it defeated a motion to dismiss. However, that win directly led to dismissal of the case.

We’ll explain.

The Federal Contractor’s Claim

The Court of Federal Claims dismissed Avant’s claim for lack of jurisdiction. Avant based its arguments on newly presented facts brought to light in previous litigation that Avant was arguing before the Armed Services Board of Contract Appeals. There, Avant alleged the government constructively accepted products Avant delivered, even though the government rejected the products, because the government retained possession of the products after delivery and enjoyed ownership rights associated with that possession. During the board of appeals litigation Avant learned for the first time that the Government used the products by transferring them to a third party.

New Facts

Relying on the newly presented facts, Avant filed a renewed complaint with the Court of Federal Claims. This time, Avant alleged the government’s use of the rejected products constituted a separate and distinct basis for a constructive acceptance claim. The government disagreed and filed a motion to dismiss. In the initial motion, the government argued the claim was precluded by the previous board of appeals litigation. However, the court held that the claim was based on newly presented facts. Therefore, the motion was denied because the new facts didn’t form part of the basis for the original board of appeals claims.

Perhaps fortuitously for the government, this ruling helped support the second motion to dismiss.

That time, the government argued that the contracting officer never received the claim which included the newly presented facts. More importantly, the government argued that the court lacks subject matter jurisdiction over claims until they have been denied by the contracting officer.

The Federal Contractor’s Catch-22

So, Avant found itself in a position where it escaped dismissal on preclusion grounds by arguing that the newly presented facts weren’t part of the claim. But that led the government to argue that the newly presented facts weren’t properly brought to the contracting officer for a final decision. As a result, the court found that it lacked subject matter jurisdiction over the new claim and granted the government’s second motion to dismiss.

So, what’s the lesson if you’re a federal contractor? Even if it seems unnecessary or duplicative, make sure you file a claim with the agency before pursuing any remedy at court even if you are certain that the agency will deny it. Denial of the claim is a necessary step for the court to exercise jurisdiction.

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