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Contractor Barred from Asserting Defenses to Liquidated Damages Because It Failed to Submit Formal Claim to Navy
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August 9, 2010
By Christian F. Henel
A contractor that failed to present factual defenses as a “claim” in the form required by the Contract Disputes Act in response to the federal government’s imposition of liquidated damages was barred from asserting those defenses.
The Navy contracted with M. Maropakis Carpentry, Inc. on April 6, 1999, to replace windows and a roof on a Navy warehouse. As a result of delays Maropakis attributed to the government, the project was completed 467 days late.
Three months after completion of the work, on August 21, 2001, Maropakis wrote the Navy stating it had experienced delays, setting out five causes for the delays and requesting a time extension of 447 days. In response, the Navy told Maropakis that it had not stated a sufficient factual basis for a time extension and invited Maropakis to provide more information.
Ten months later, the Navy reminded Maropakis that it had not responded to the Navy’s letter and that it had not requested a Contracting Officer’s Final Decision. The letter also told Maropakis that the Navy had assessed liquidated damages of $303,550 against Maropakis for late completion and had set off against the contract balance, leaving Maropakis owing $59,514.
About six weeks later, Maropakis responded, writing that it would dispute imposition of liquidated damages on the basis that it did not cause delay. The letter reiterated Maropakis’ prior request for time extensions but mentioned only one specifically, 107 days for lead-contaminated windows.
There was no further correspondence from either party, and Maropakis did not file a formal claim for time extensions. The Navy issued a Final Decision on December 20, 2002, providing for liquidated damages.
There was no further activity by either party until December 17, 2003, when Maropakis filed a complaint in the U.S. Court of Federal Claims seeking: 1) a time extension on a breach of contract theory; and 2) remission of the $303,550 in liquidated damages assessed by the Navy. The government counterclaimed for the $59,514 in liquidated damages not covered by its setoff against the contract balance.
The Navy moved to dismiss Maropakis’ claim on grounds that the Court of Federal Claims lacked subject matter jurisdiction. The Navy argued that Maropakis had failed to satisfy the jurisdictional prerequisites of the Contract Disputes Act (CDA), 41 USC §§601, et seq., which requires a contractor to submit a written “claim” for a “sum certain” or other relief that “gives the contracting officer adequate notice of the basis and amount of the claim.” The Court of Federal Claims granted the Navy’s motion to dismiss on October 3, 2008. It also granted the Navy’s motion for summary judgment on the liquidated damages.
Maropakis appealed to the U.S. Court of Appeals for the Federal Circuit. First, Maropakis asserted that the several letters it wrote to the Navy requesting time extensions constituted a claim satisfying the jurisdictional requirements of the CDA. Second, Maropakis asserted that even if the letters did not satisfy CDA, the Court of Federal Claims erred in not considering facts put forward by Maropakis as a defense to the Navy’s assessment of liquidated damages.
The appeals court affirmed the Court of Federal Claims. M. Maropakis Carpentry, Inc. v. United States, ___ F.3d ____, 2010 WL 2403337, No. 2009-5024 (June 17, 2010).
On Maropakis’ claim for a time extension, the appeals court held that the Court of Federal Claims lacked jurisdiction because Maropakis’ letters requesting time extensions failed to satisfy the jurisdictional prerequisites of the CDA. The appeals court acknowledged that a claim need not follow a particular form or use particular words. But, the appeals court held that the letters failed to state with adequate certainty the number of days of time extension sought, failed to give the Contracting Officer adequate notice of the basis for the time extensions sought and failed to request a Contracting Officer’s Final Decision. Accordingly, the appeals court held that dismissal was proper.
On the Navy’s claim for liquidated damages, the appeals court again affirmed, holding that the Court of Federal Claims properly ignored Maropakis’ factual defenses to the Navy’s motion for summary judgment for liquidated damages.
The appeals court wrote that because Maropakis did not comply with the CDA in presenting its claim for time extensions and delay, Maropakis was barred from presenting and relying on its entitlement to a time extension as a defense to the government’s claim for liquidated damages.
The appeals court found it irrelevant that Maropakis sought to assert the time extension as a defense to the government’s claim rather than as a claim, noting: “we hold that a contractor seeking an adjustment of contract terms must meet the jurisdictional requirements and procedural prerequisites of the CDA, whether asserting the claim against the government as an affirmative claim or as a defense to a government action.” It wrote that CDA permitted no exceptions and that Maropakis had cited to no contrary authority.
The court rejected an “actual knowledge” argument by Maropakis, holding that actual knowledge by the government of a contractor’s claim does not satisfy the strict and explicit claim submission requirements of the CDA.
Judge Newman filed a strong dissent, writing that no rule or precedent held that a contractor forfeited its right of defense by not filing its own claim. He wrote that the majority decision was “contrary to the purposes of the CDA, contrary to precedent, and an affront to the principles upon which these courts were founded.”
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