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Judicial Estoppel Precluded Consideration of Counterclaim

The Court of Federal Claims dismissed a government counterclaim for reprocurement costs on the basis of judicial estoppel because raising the counterclaim was inconsistent with the government's earlier litigation position regarding the contracting officer's authority to issue a decision on the contractor's claim for convenience termination costs. The contractor's initial complaint sought to convert the termination for cause of a contract for commercial items to a convenience termination and a declaration the contractor was entitled to "appropriate monetary relief." The CO subsequently issued a final decision demanding excess reprocurement and incidental costs. After the contractor amended its complaint to request an award for damages, the government filed a counterclaim for excess reprocurement and incidental costs. Citing Sharman Co. v. U.S. (39 CCF ¶76,567), the contractor argued the government's counterclaim should be dismissed for lack of subject matter jurisdiction because the CO lacked authority to issue the final decision once the "substance" of the counterclaim was pending before the CFC. The government responded that there was "no factual or legal overlap" between the contractor's appeal of the termination for cause and the government's claim for reprocurement and incidental costs.
Contradictory Argument
According to the CFC, the best reading of the court's precedent indicated a CO loses authority to issue a final decision on claims for a particular sum of money that are in litigation. Accordingly, because the contractor's initial complaint did not involve a monetary claim, the pendency of the complaint would not remove the CO's authority to decide whether the government should pay convenience termination costs or if the contractor owes reprocurement costs. Before trial, however, the government filed a motion to dismiss the contractor's monetary claim under CFC Rule 12(b)(1) and argued the CO was divested of authority to rule on the monetary claim when the contractor filed its initial complaint. Application of the rule of judicial estoppel --which "generally prevents a party from prevailing in one phase of a case on an argument and then relying on a contradictory argument to prevail in another phase" --was warranted because the government's current and earlier positions were clearly inconsistent. If a claim for convenience costs was beyond the CO's authority once the propriety of the termination for cause was put into litigation, then the demand for reprocurement and incidental costs also fell outside the CO's authority to issue a decision. (Universal Shelters of America, Inc. v. U.S., FedCl, 53 CCF ¶79,111)

(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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