Contract Disputes Act Contract Statute of Limitations for Government Claims 41 USC 7103

By Theodore P. Watson, Esq. Government contractors are sometimes confused about the Contract Disputes Act (CDA) government contract statute of limitations when it comes to submitting government contract claims.

The Federal Acquisition Streamlining Act of 1994 (FASA) changed the CDA to establish a limitation period for filing contract claims against the Government. There are still many cases at the appeal stage where there is a significant dispute as to when the CDA contract statute of limitations starts, whether “tolling” applies or not. Ultimately, the legal issue is whether the Court has jurisdiction to hear your appeals case.

Six-Year Rule 41 USC 7103(a)(4)(A)

Under 41 USC 7103(a)(4)(A), the Contract Disputes Act statute limitations suggest that a government contract claim “shall be submitted within six years after the accrual of the claim. The Armed Services Board of Contract Appeals (ASBCA) and the Civilian Board of Contract Appeals (CBCA) sometimes have erred in the application.

Relevant to understanding the gravity of the rule, government attorneys will often try to file a motion to dismiss or wait for the Court to raise what is supposed to be the contracting agency’s legal defense.

The six-year CDA contract statute of limitations of the government under the Contract Disputes Act is viewed as an aspect of the waiver of the Government’s sovereign immunity and has been held to be jurisdictional. Courts do not have the authority to change the limitation period. The gist of the Government’s argument is that the limitations period had passed before the contractor submitted its claim for payment. First, the definition of a claim under the Contract Disputes Act is mentioning.

What is a Contract Claim?

Under the Contract Disputes Act, a “claim” means a written demand or written assertion by the Government or the contractor seeking, as a matter of right, the payment of money in a sum certain, the adjustment or interpretation of contract terms, or other relief arising under or relating to the contract. See information about defective specification claims.

Importantly, a written demand or written assertion by the contractor seeking the payment of money exceeding $100,000 is not a claim under 41 USC Chapter 71, Contract Disputes, until certified as required by the statute. . . . See 48 CFR 2.101.

Court Jurisdiction

At the ASBCA, CBCA, or U.S. Court of Federal Claims, the Court’s six-year statute of limitations, which is a condition on the Tucker Act’s waiver of the Government’s sovereign immunity, further limits the Court’s jurisdiction. See Martinez v. United States, 333 F.3d 1295, 1316 (Fed. Cir. 2003) (en banc) (“It is well established that statutes of limitations for causes of action against the United States, being conditions on the waiver of sovereign immunity, are jurisdictional in nature.”); see also Soriano v. United States, 352 U.S. 270, 276 (1957) (stating that the United States Supreme Court “has long decided that limitations and conditions upon which the Government consents to be sued must be strictly observed”). But see the Federal Circuit Court’s opinion, which appears to confirm that the limitations period of the Contract Disputes Act is not jurisdictional. See Sikor- sky Aircraft Corp. v. United States, 773 F.3d 1315 (Fed. Cir. 2014).

For example, in a breach of contract claim against the Federal Government, the actual claim first accrues when a contractor has entirely performed its obligations under the contract.

The performance will then entitle the contractor to the performance by the Government (payment), but the Government refuses to pay and then issues a contracting officer’s final decision that denies the claim in part or in total. See Oceanic Steamship Co. v. United States, 165 Ct. Cl. 217, 225 (1964) (per curiam) (reprinting opinion and recommendation of trial commissioner, adopted as supplemented) (“[W]here a claim is based upon a contractual obligation of the Government to pay money, the claim first accrues on the date when the payment becomes due and is wrongfully withheld in breach of the contract.”); accord Kinsey v. United States, 852 F.2d 556, 557 (Fed. Cir. 1988); see also Brighton Vill. Assocs. v. United States, 52 F.3d 1056, 1060 (Fed. Cir. 1995) (stating that “[a] claim accrues when all the events have occurred which fix the liability of the Government and entitle the claimant to institute an action” (internal quotation marks omitted)).

The common dispute between the Government and the contractor is when does the statute of limitations start to run? Some argue that it begins when the Government refuses to pay. However, the more likely argument is when the contractor finishes performance, and the Government has the liability to pay.

When Does the Contract Disputes Act Statute of Limitations Period Start?

This issue is the heart of every CDA statute of limitations dispute. The Contract Disputes Act does not specify when the period starts. However, you must look to see:

• The date when all events that are relevant to the claim are known or should have been known.
• For liability to become fixed, you must show some level of injury.
• You do not necessarily have to incur monetary damages.
• A claim should not accrue until the contractor has performed the requirement, and the Government then has liability pay.

Tip: The Boards of Contract Appeals lack jurisdiction to hear appeals of claims against the Government when there is no final contracting officer’s final decision.

Tip: The deadline for filing government claims does not apply to contracts awarded before October 1, 1995.

Applying the Contract Disputes Act statute of limitations can be very tricky. Many government contracts have spent thousands in attorney fees on factual disputes. However, the  Federal Circuit ruled in once case that the six-year deadline for breach of contract did not start until the date that the plaintiff incurred liability and not the time of the breach.

Equitable Tolling 

The Contract Disputes Act statute of limitations of the government provides, in limited situations, equitable tolling of the deadline. The deadline means that if you give convincing evidence, the six-year statute of limitations period may be extended. These situations are very fact-specific and should not be looked at lightly. Again, it is up to you, the contractor, to raise this issue to the Court.

What are the types of things that may toll the statute of limitations?

In some discussions, conversations with or direction by the contracting officer can rise to the level of equitable tolling of the statute of limitations. However, each case is fact-specific and unique. In the case of  Irwin v. Department of Veterans Affairs, 498 U.S. 89, 95-96 (1990), the United States Supreme Court held that a “presumption” of equitable tolling applies to suits against the United States even though a waiver of sovereign immunity is to be strictly construed. In Federal Government Contract Disputes Act cases, the agency attorneys may very well argue that the statute of limitations for the CDA is jurisdictional and may not be waived.

However, in the Irwin case, the Supreme Court held that there is a presumption in favor of tolling which can be rebutted if tolling would not be applicable in a similar suit between private parties, or if Congress did not want tolling to apply. 498 U.S. at 95-96.

What must you prove to prevail on equitable tolling of the statute of limitations in a government contracts appeal case?

As the appealing contractor seeking equitable tolling, you bear the legal burden of establishing two elements: (1) that he has been pursuing his rights diligently, and (2) that some extraordinary circumstance stood in his way.” Pace v. DiGuglielmo, 544 U.S. 408, 418 (2005) (citing Irwin, 498 U.S. at 96).

Courts do not grant equitable tolling in circumstances where a plaintiff “knew or should have known” of a cause of action. Hopland Band of Pomo Indians v. United States, 855 F.2d 1573, 1577 (Fed. Cir. 1988); see also Japanese War Notes Claimants Ass’n of Philippines v. United States, 373 F.2d 356, 359 (Ct. Cl. 1967) (“[i]gnorance of rights which should be known is not enough”). “Mere excusable neglect is not enough to establish a basis for equitable tolling.” Martinez v. United States, 333 F.3d 1295, 1318 (Fed. Cir. 2003).

From the decisions above, one can see that the burden to establish equitable tolling is not light. Having an experienced Government contracts attorney that understands the ins and outs of Contract Disputes Act statute of limitations problems.

12(b)(1) Motion to Dismiss 

As mentioned earlier, the government attorneys may file a 12(b)(1) motion to dismiss at the ASBA, CBCA or Court of Federal Claims. This type of motion argues that the Court does not have subject matter jurisdiction to hear the case on appeal because the statute of limitations has run before the contractor submitted its claim to the Government. But see Sikor- sky Aircraft Corp. v. United States, 773 F.3d 1315 (Fed. Cir. 2014).

A critical part of the analysis is whether the Contracting Officer or Defendant’s attorney has raised the defense or the Court has raised the issue. What happens if the Government’s attorney did not raise the statute of limitations defense in a 12(b)(1) or 12(b)(6) motion? Can the Court substitute the mindset of the contracting officer that wrote the final decision or raise the defense for the Government when the Government itself did not raise the issue?

Task Order Type Contracts

A common issue arises when a contractor has multiple task orders and some or all may not be subject to the statute of limitations defense under the Contract Disputes Act. The government attorneys may still file a motion to dismiss just to see what happens. The issue is whether all task order claims have ‘evaporated’ due to the running of the Contract Disputes Act statute of limitations statute of limitations.

Contractors facing this issue on appeal should keep in mind that under Brighton Vill. Assocs. v. United States, 52 F.3d 1056, 1060 (Fed. Cir. 1995), the Federal Circuit Court of Appeals ruled that ( “[a] claim accrues when all the events have occurred which fix the liability of the Government and entitle the claimant to institute an action” (internal quotation marks omitted)).

It would seem that when the task or delivery under the task order is completed that you have a claims accrual point where the Government has the liability to pay. A claim, therefore, cannot occur before the event or delivery occurs.

Court Analysis When Deciding a 12(b)(1) Motion to Dismiss CDA Statute of Limitations

When deciding a motion to dismiss under 12(b)(10, the Court assumes all factual allegations in the appeals complaint as if they were true and draws all reasonable inferences in the plaintiff’s (non-moving party’s favor.) Scheuer v. Rhodes, 416 U.S. 232, 236 (1974), overruled on other grounds by Harlow v. Fitzgerald, 457 U.S. 800, 814-19 (1982); United Pac. Ins. Co. v. United States, 464 F.3d 1325, 1327-28 (Fed. Cir. 2006).

Common problems occur during litigation in Contract Disputes Act statute of limitations cases when the Court substitutes it decision for that of the contracting officer or rules the case without adhering to the standards for a motion to dismiss.

As the contractor, you still have to show that the Court does have subject matter jurisdiction to hear the case. This is especially true when the are some task orders or invoices that fall within the limitations period. These are matters that entitle the Court to reach the merits of the case. See McNutt v. Gen. Motors Acceptance Corp. of Ind., 298 U.S. 178, 189 (1936).

You, as the government contractor, must establish subject matter jurisdiction by a preponderance of the evidence. See Reynolds v. Army & Air Force Exch. Serv., 846 F.2d 746, 748 (Fed. Cir. 1988).

The complaint at best must raise the issue of individual task orders or separate invoices that arguably fall within the statute of limitations period.

12(b)(6) Motion to Dismiss in Contract Disputes Act Cases 

Another strategy that creates problems for contractors is government contract claims cases occur when the government lawyers file a 12(b)(6) motion to dismiss. When deciding these motions, and for you to prevail, the Court must look to see if the complaint’s “[f]actual allegations are enough to raise a right to relief above the speculative level.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 545 (2007). Oftentimes, courts may tend to go beyond that requirement and meddle with the merits of the case instead of making a determination in a light more favorable to the contractor as to whether it is entitled to proceed with the case and get to the merits.

Other issues for the Court to consider is whether the complaint is required to be at the ‘notice pleading’ level or pleading with ‘specificity’ level. Similar to the 12(b)(1) motion, when ruling on an RCFC 12(b)(6) motion to dismiss, the Court must accept as true the complaint’s undisputed factual allegations and should construe them in a light most favorable to you, the plaintiff. See Gould, Inc. v. United States, 935 F.2d 1271, 1274 (Fed. Cir. 1991.)

See Tips On How to File a Contract Disputes Act Claim

How to Avoid Legal Problems With the Contract Disputes Act?

Instead of taking risks and litigating disputes about the Contract Disputes Act statute of limitations period, you should consider filing your claims as soon as you know about your problem or can prove injury. Courts tend to be subjective when deciding motions to dismiss. Therefore, it is critical to remember that the standard for determining dismissals should err on the side of the contractor (non-moving party).

For more help and legal representation about claims against the Government, call a government Claims and Contract Disputes attorney to reduce your chances of missing the six-year federal Contract Disputes Act statute of limitations deadline. Call 1-866-601-5518 for a FREE INITIAL CONSULTATION.