In Panther Brands, LLC v. The United States, No. 16-1157C (December 17, 2019), the Court of Federal Claims addressed the elements of an implied-in-fact contract in the context of a motion for summary judgment dismissal of the plaintiff’s claims.

Case Background

Beginning in 2008, the National Guard had annually sponsored Panther racing teams in the IndyCar Series to advertise and market itself. In 2012, the Guard issued a task order to an advertising company, LM&O, to find a driver and team within the IndyCar Series to sponsor. Final approval of the selection was vested with the Guard Contracting Officer. In October 2012, LM&O’s subcontractor entered a sponsorship agreement with Panther effective from date of execution through the final race of the 2013 series.

According to Panther’s CEO, Panther’s practice was to prepare for the next racing season before there was a written sponsorship agreement in place based on verbal notice of intent to exercise a renewal. The Guard Contracting Officer, Maj. Ellieth Rodriguez, stated that she was unaware of this practice but was not surprised if that had occurred in the past.

In February, 2013, Panther’s CEO met with LTG Ingram, then Director of the Army National Guard. During that meeting, Mr. Barnes alleged that LTG Ingram told him that the Guard’s sponsorship of Panther was authorized and fully funded for the 2014 season, so there was no need for Panther to seek other major sponsors.

Through a series of phone conversations, Panther was advised that Sgt. Tyrone Kosa had “full authority to represent the Guard in its communications with Panther regarding the sponsorship. However, Sgt. Kosa’s authority and responsibilities as COR were set forth in a delegation memorandum. That memorandum expressly stated that the COR “was not authorized to aware, agree to, or sign any contract modification[], or in any way obligate the payment of money by the Government.”

Sgt. Kosa testified that he understood it was his responsibility to inform Panther of all operational decisions made by the Guard concerning the program. Based on discussions Sgt. Kosa had with LTC Mark Boettcher, Chief of Army National Guard Recruiting, Sgt. Kosa informed Panther on or about February 25, 2013, that the Panther contract was being renewed for 2014, and that Panther should start preparing for the 2014 season.

In reliance on that notification, Panther alleges it incurred substantial costs and commitments to prepare for the 2014 season.

However, Panther’s contract was not extended for 2014, and Panther was not selected as the Guard’s sponsored 2014 racing team. Panther’s bid protest was rejected by the GAO, and Panther thereafter filed its complaint, alleging among other actions breach of an implied-in fact contract after its claims to the Contracting Officer were denied.

Implied-in-Fact Contracts Must Meet Same Requirements as Express Contracts

In ruling on the Guard’s motion for summary judgment the court stated, “An implied-in-fact contract is one founded upon a meeting of minds and is inferred, as a fact, from the conduct of the parties showing, in the light of the surrounding circumstances, their tacit understanding.” The court continued by noting that an implied-in-fact contract must meet the same requirements as an express contract, including:

  1. Mutuality of intent to contract;
  2. Lack of ambiguity in offer and acceptance;
  3. Consideration; and
  4. A government representative having actual authority to bind the United States in contract.

In this case, the court found that dismissal was appropriate because Panther failed to provide evidence that the Guard officials whom it alleges extended its sponsorship agreement had the actual authority to bind the government in contract and, indeed, the undisputed evidence of record shows that they did not.

Plaintiff’s Arguments 

Panther argued that Sgt. Kosa had implied actual authority to bind the government as an integral part of his assigned duties. The court rejected this argument, noting “the doctrine of implied authority cannot be used to create an agent’s actual authority to bind the government in contract when the agency’s internal procedures specifically preclude that agent from exercising such authority.” Sgt. Kosa’s delegation of authority expressly precluded obligating the government to the payment of money.

Panther argued that equitable estoppel barred the Guard from now asserting that Sgt. Kosa lacked authority. The court rejected this argument, noting that “the Government is not estopped to deny the limitations on [an agent’s] authority, even though [a] private contractor may have relied on []apparent authority to his detriment.”

Panther also argued that Sgt. Kosa’s actions were ratified by the Contracting Officer. The court rejected this argument because ratification “can only be based upon a full knowledge of all the facts upon which the unauthorized action was taken” and “the underlying facts must also demonstrate [] acceptance of the contract.”

Insist on Seeing the Representative’s Scope of Authority

The court noted there was no evidence in the record from which a reasonable factfinder might infer that the Contracting Officer or others with contracting authority had full knowledge regarding Sgt. Kosa’s communications with Panther or that she (the Contracting Officer) acquiesced in any commitments he (Sgt. Kosa) made.1

The lesson learned from this case is to make sure that you understand the scope of the authority held by each Government representative when you are negotiating contracts and contract modifications. The most effective means of determining the authority is to insist upon seeing the representative’s delegation of authority.

The second lesson is if you are receiving direction from an unauthorized representative, make sure that you obtain ratification of that direction from a representative having the requisite authority. If you have any questions about this case or the issues raised, please contact us.