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Government Within Rights to Waive Anti-Assignment Prohibition

The dismissal of claims seeking damages for the government's breach of nuclear waste removal contracts was affirmed by the Court of Appeals for the Federal Circuit because the claimants assigned their interests and the government properly waived its right to invalidate the transfers under the Assignment of Claims Act. The dispute, which presented an issue the court had previously not decided, arose from the government's unsuccessful program to remove and dispose of spent nuclear waste from the country's nuclear electric generating facilities. The government defaulted on its contractual obligations by failing to initiate the program. The claimants, which owned minority interests in nuclear plants impacted by the government's default, subsequently transferred their interests in the plants and assigned to the purchasers all claims "relating to or pertaining to the [government's] defaults." The claimants then filed a complaint in the Court of Federal Claims, alleging a taking of their former property interests. According to the claimants, the government's breach of contract diminished the value of the nuclear plants and, as a result, they received less from the sale of their interests. When the purchasers learned of the suit, they invoked the transfer agreements' arbitration clause and obtained an award establishing an assignment of the taking claims from the claimants.
Discretion Exercised

When the claimants moved to vacate the arbitration award in the CFC, the government filed a document waiving its right to invalidate the assignments under the Assignment of Claims Act (31 USC 3727), and the CFC held the waiver was proper. On appeal, it was clear from the language of the assignment clause in the transfer agreements that the assignments included the takings claim. However, the question remained as to whether the ACA barred those transfers. Under the ACA, an assignment of a claim against the government "may be made only after a claim is allowed, the amount of the claim is decided, and a warrant for payment of the claim has been issued." Here, the government contested the claims, and the amount of the claims was uncertain and no warrant ever issued. Thus, the government could invoke its rights under the ACA to invalidate the assignments. Instead, the government chose to exercise its discretion and waived its right to invalidate the transfers. The government specifically "assented to, and recognized the assignment." The claimants contested the government's waiver, but they could not establish a valid reason for denying the government the power to waive its ACA rights. The statute is intended for the "protection of the [g]overnment,"and here the government concluded it was in its best interest to accept the assignments. The government, therefore, recognized as valid an assignment of claims that would have otherwise violated the ACA, which prevented the assignors from asserting the taking claims. (Delmarva Power & Light Co., et al. v. U.S., et al., CA-FC, 52 CCF 79,014)

(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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