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Breach Claim Untimely, Award Vacated on Appeal


The Court of Appeals for the Federal Circuit vacated and remanded an award of breach damages to the third-party beneficiary of a contract modification because the claim was time-barred by 28 USC 2501, the Tucker Act's six-year statute of limitations. The unpaid subcontractor asserted the government breached a modification of a contract to install floor coating when it paid the prime contractor directly instead of issuing a two-party check to the prime and the subcontractor. The Court of Federal Claims held the 2009 complaint was timely because it accrued in 2004 when the government filed a brief at the Armed Services Board of Contract Appeals contending the subcontractor had no enforceable rights under the modification, and the subcontractor "did not sleep on its rights" by first filing suit at the ASBCA ( 54 CCF 79,429). The CFC also determined the subcontractor was entitled to breach damages as the modification's intended third-party beneficiary ( 55 CCF 79,557).

Complete and Present Cause of Action

The Federal Circuit held the subcontractor's cause of action accrued in 2002 when the government breached the modification by paying the prime directly. The subcontractor had "a complete and present cause of action" when, three weeks later, the government informed the subcontractor in a letter that it had paid the prime directly but believed it had fulfilled its contract obligations and would not make any payment to the subcontractor. There was no merit to the subcontractor's contention the government did not repudiate the modification until it filed its ASBCA brief, because the letter was an unequivocal refusal to pay the subcontractor under the terms of the modification. In addition, the Supreme Court has made clear that 2501 sets an "absolute," jurisdictional time limit ( R. Sand & Gravel Co. v. U.S. 52 CCF 78,875), and equitable tolling did not apply. ( FloorPro, Inc. v. U.S., CA-FC, 56 CCF 79,836)




(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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