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Appeal Rights Can Be Contractually Waived

A contractor's appeal of an Armed Services Board of Contract Appeals decision was dismissed by the Court of Appeals for the Federal Circuit because the contractor knowingly and voluntarily waived its right to appeal. The dispute arose from a contract to build and operate a hotel facility at a military base. The contract provided it was not subject to the Contract Disputes Act and the disputes clause made the ASBCA the exclusive and final appellate review forum. After the ASBCA dismissed the contractor's breach claim as duplicative ( 10-2 BCA 34,510), the contractor appealed to the Federal Circuit, where it argued it could not legally consent to waive its statutory right to an appeal. According to the contractor, its agreement to waive its appeal rights was contrary to the CDA and public policy.

Congressional Intent

However, the CDA's plain words and meaning in 41 USC 7107(a)(1) did not preclude a waiver of appeal rights. Also, nothing in the CDA's legislative history demonstrated Congress did not intend for parties to be able to agree to the finality of ASBCA decisions. In addition, under extensive case law from the Supreme Court and the Federal Circuit, parties may waive appeal rights if done so knowingly and voluntarily (see e.g., Newton v. Rumery, 480 US 386). Here, the record and pleadings indicated the contractor freely agreed to the finality of ASBCA decisions, and while a promise can be unenforceable if the interest in its enforcement is outweighed by public policy, public policy is not per se offended when a sophisticated contractor knowingly and voluntarily agrees to an appellate waiver provision denying Federal Circuit review. In addition, the CDA's standard of review provision, 41 USC 7107(b), was irrelevant to the issue of contractual waiver as it merely set out the court's review standard and did not show Congress intended appeals from the ASBCA to be unwaivable.


Circuit Judge Beyson in dissent considered the waiver provision unenforceable and took issue with the majority's conclusion that a party can freely contract away its right to judicial review. According to the dissent, that principle does not apply when a provision in a government contract conflicts with a federal statute, and the CDA was not designed to diminish the statutory right of government contractors to obtain judicial review of board decisions. In addressing the merits of the appeal, the dissent would have affirmed the ASBCA's dismissal of the contractor's claims. ( Minesen Co. v. McHugh, CA-FC, 56 CCF 79,775)




(The news featured above is a selection from the news covered in the Government Contracts Report Letter, which is published weekly and distributed to subscribers of the Government Contracts Reporter. )


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