Forrest Gump’s mama was a brilliant woman. As anyone who watched the 1994 Academy Award-winning classic can confirm, Mrs. Gump’s advice to her son provided an indispensable well of wisdom from which Forrest often drew to navigate life’s many adversities. Perhaps the most famous of Mrs. Gump’s quotes equated the unpredictability of life with the somewhat surprising discoveries one can make after removing the lid from a box of chocolates. As it turns out, contractors can learn a lot from Mrs. Gump.
With its August 9, 2016, opinion in AMX Veterans Specialty Servs., LLC, CBCA No. 5180, the Civilian Board of Contract Appeals (“Board”) reiterated an important message that has become all too familiar to companies pursuing claims against the Government: facts matter, the law matters, and sometimes the Government seems to know neither. This is a case in which the Government’s reliance on outdated law, incorrect facts, and unfounded assumptions required a small business to expend precious time and resources defending itself against allegations that it improperly certified a claim and incorrectly lodged an appeal with the Board. The case is not complicated:
- On September 30, 2011, the Department of Veterans Affairs (“VA”) entered into a contract with AMX Veterans Specialty Services, LLC (“AMX” or the “Company”) to demolish an auditorium and to construct the Learning Center of the North Texas Veterans Health Care Center in Dallas, Texas.
- During performance, the contract was modified nine times, with AMX’s Chief Operating Officer (“COO”) executing each modification on behalf of the Company.
- The VA terminated the contract for default on December 5, 2013. Less than two years later – on April 10, 2015 – the VA converted the default termination to a termination for convenience.
- On June 29, 2015, AMX submitted a termination for convenience settlement proposal. As with the bilateral contract modifications, this document also was signed by the COO.
- On November 6, 2015, AMX submitted a $2,232,214 certified claim to the VA for costs and damages incurred both before and as a result of the termination for convenience. The COO certified the claim on behalf of AMX.
- The VA failed to issue a contracting officer’s final decision on the claim within the requisite sixty-day time period.
- AMX subsequently filed a formal Notice of Appeal (“Appeal”) with the Board on January 29, 2016, based on the theory that the VA’s failure to respond to the claim was deemed to be a decision denying the claim.
- The VA filed a Motion to Dismiss (“Motion”) the Appeal based on lack of subject matter jurisdiction. In so doing, the VA alleged that:
- AMX’s certification was defective because the COO did not have the authority to bind the Company, and
- The case was improperly before the Board because the Appeal was not signed by an authorized individual.
The Board rejected the VA’s arguments in their entirety because, simply stated, they were factually unsubstantiated and legally unmeritorious. A brief distillation of the opinion is as follows:
- First, the Board noted that it is “well-settled law that even if [the COO] did not have authority to certify AMX’s claim, and the certification would consequently be considered defective, the Board would not be deprived of jurisdiction.” The Board also chastised the VA for “incorrectly rel[ying] on pre-1992 case law” to support its Motion, notwithstanding the fact that the Contract Disputes Act (“CDA”) of 1978 was amended in 1992 – nearly a quarter century ago – explicitly to provide that a defect in the certification of a claim does not deprive an agency board of contract appeals of jurisdiction over that claim.
- Second, the VA alleged that the COO did not have the authority to bind AMX because the underlying contract was not signed by the COO. This argument did not gain any traction because there is no requirement that an individual certifying a claim on behalf of a company must have executed the underlying contract to which the claim relates.
- Third, the VA contended that the COO lacked the requisite authority to certify the claim because the reports filed with the Texas Secretary of State did not list the COO as the COO or manager of AMX. In dispatching this argument, the Board noted that the VA “failed to point to any provision that required AMX to file certain documents with the State of Texas to establish [the COO’s] authority.” The Board also found that the COO had both the actual and apparent authority to bind AMX for purposes of certifying the claim. The COO had actual authority because he was elected as the manager and appointed the COO of AMX, which by AMX’s own regulations vested him with the broad authority to obligate the Company for claim certification purposes. The COO had apparent authority because AMX created the reasonable belief that the COO had the power to bind the Company and the VA “accepted as binding” the COO’s signature on behalf of AMX on numerous contract documents during and after contract performance, including: (1) all nine of the contract’s bilateral modifications, (2) the settlement agreement converting the termination for default to a termination for convenience, and (3) the termination for convenience settlement proposal. During these many critical exchanges with the Government, the Board found “no indication” that the VA questioned the COO’s authority “to bind AMX during or after contract performance.”
- Fourth, the VA argued that AMX’s claim should be dismissed under Board Rules 2 and 5 because the Appeal was signed by an individual who purportedly “lacked the authority” to do so. Remarkably, the VA’s argument was premised on the mistaken belief that the Appeal had been executed by the COO, when it had in fact been signed by AMX’s attorney in accordance with Rules 2 and 5.
Unfortunately, this type of disconcerting fact pattern typifies the unpredictable battlefield that increasing numbers of contractors are being forced to navigate when litigating against the Government. If your company is in an active or contemplated dispute with the Government, consult with counsel early and often to ensure that any misstatements and/or unfounded arguments advanced by Uncle Sam are quickly and efficiently addressed. Most importantly, before you read anything the Government has filed, take a deep breath and remember that what Mrs. Gump said about chocolate boxes also applies to arguments advanced by the Government in the heat of litigation – “You never know what you’re gonna get.”