Brutal Government Contractor Mistake Cause Lost Appeal For Quantum Meruit Claims at COFC.
Government contractors often make the costly mistake of performing out of scope work without the expressed written permission of the contracting officer. Many contractors fail at the litigation stage because they do not understand the difference between a quantum meruit claim vs unjust enrichment.
A recent case at the Court of Federal Claims showed the example of a company that potentially lost hundreds of thousands of dollars for work done.
When your company takes orders from a Contracting Officer Representative (COR) without written approval from the contracting officer, you are essentially gambling with fate when filing a quantum meruit basis appeal case. The US Court of Federal Claims will essentially dismiss your case as it did here for lack of jurisdiction.
Although the government may have benefited, the courts issue harsh decisions: Attempting to resolve any issues at the contracting officer level would be the only bet for companies seeking reimbursement. However, the agency will have no problem filing a motion to dismiss on appeal to either the Board of Contract Appeals or the Court of Federal Claims.
Emails alone may not win the case: Although it is helpful to save all email and correspondence to the contracting officer, the court will look at the actual source of direction upon which the contractor relies. If the contracting officer representative issues the direction to proceed with additional work or out-of-scope requirements, the court most likely will not grant any relief on appeal.
Where a benefit has been conferred by a federal contractor on the government in the form of goods o, which it accepted, the contractor may recover at least on a quantum valebant basis for the value of the conforming goods by the government prior to the rescission of the contract for invalidity. The contractor is not compensated under the contract, but rather under an implied-in-fact contract.
Alternatively, when the contractor confers a benefit on the government in the form of services, which the government accepts, then the contract can potentially recover at least on a quantum meruit basis for the value of the services performed. Keep in mind that these recoveries are not based on the written contract. Instead, these equitable remedies are based upon an implied in fact contract.
Quantum Meruit Basis for Denying Government Contract Damages
Most government contracts expressly warn companies that only the contracting officer has the authority to bind the government. As a result, and despite having the work completed, the contracting officer will still deny the claim. Contractors should always see written approval from the contracting officer or run the risk of not getting paid.
Court Lacks Jurisdiction over Unjust Enrichment Based in Quantum Meruit Claims
Contractor attorneys often raise the argument that their clients are entitled to recover on a “quantum meruit basis for the value of the goods or services received by the government.” The basis is that the contractor conferred a benefit to the government agency, unjust enrichment, by providing services outside the scope of the contract.
Under government contract law, Quantum merit presents an implied-in-law claim. A court when applying quantum meruit case law generally does not have jurisdictional power to hear the case for quantum damages. See International Data Prods. Corp. v. United States, 492 F.3d 1317, 1325 (Fed. Cir. 2007); Atlas Corp. v. United States, 895 F.2d 745, 755 (Fed. Cir. 1990); see also Trauma Serv. Grp., Ltd. v. United States, 33 Fed. Cl. 426, 432 (1995) (“Claims for unjust enrichment on quantum mer[u]it damages state claims for breaches of contracts implied in law, over which the court has no jurisdiction.”) (citations omitted), aff’d sub nom. Trauma Serv. Grp. v. United States, 104 F.3d 1321 (Fed. Cir. 1997).
The United States Court of Appeals for the Federal Circuit has indicated:
A recovery in quantum meruit basis or quantum valebant is based on an implied-in-law contract. That is, a contract in which there is no actual agreement between the parties, but the law imposes a duty in order to prevent injustice. The Court of Federal Claims, however, lacks jurisdiction over contracts implied in law. 28 U.S.C. § 1491(a)(1) (2000). Int’l Data Prods. Corp. v. United States, 492 F.3d 1317, 1325 (Fed. Cir. 2007); see also Perri v. United States, 340 F.3d 1337, 1343 (Fed. Cir. 2003) (In a quantum meruit claim implied in law, “[t]he theory is that if one party to a transaction provides goods or services to the other party that the parties intended would be paid for, but the recipient refuses to pay for them, the law will imply a contract for the recipient to pay the fair value of what it has received.” (citing United States v. Amdahl Corp., 786 F.2d 387, 393 (Fed. Cir. 1986))); Am. Tel. & Tel. Co. v. United States, 124 F.3d 1471, 1479 (Fed. Cir. 1997) (“In Quantum meruit is the name given to an implied-in-law remedy for unjust enrichment. See information about protesting the rule of two.
As a general rule, it falls outside the scope of relief available through the Court of Federal Claims.” (citing Trauma Serv. Group v. United States, 104 F.3d at 1324–25)), granting reh’g en banc and vacating on other grounds, 136 F.3d 793 (Fed. Cir. 1998), reh’g en banc, 177 F.3d 1368 (Fed. Cir. 1999).
Exception to Court Quantum Meruit Claims Jurisdiction
Although the general rule is that a Court on appeal does not have quantum meruit jurisdiction, there is one exception.
In limited circumstances, a contractor can seek recovery on a government contract claim in quantum meruit or quantum valebant basis when, for example, the government attempted to form a contract with a private party, but a defect prevented the contract “from actually coming into existence or the government simply refuses to pay.” Enron Fed. Solutions, Inc. v. United States, 80 Fed. Cl. at 409-10; see also Lumbermens Mut. Cas. Co. v. United States, 654 F.3d at 1317 n.9; Council for Tribal Emp’t Rights v. United States, 112 Fed. Cl. at 252-53.
As explained by the Federal Circuit: On the other hand, “[w]here a benefit has been conferred by the contractor on the government in the form of goods or services, which it accepted, a contractor may recover at least on a quantum valebant or in quantum meruit basis or unjust enrichment for the value of the conforming goods or services received by the government prior to the rescission of the contract for invalidity. The contractor is not compensated under the contract, but rather under an implied-in-fact contract.” United Pac. Ins. Co. v. United States, 464 F.3d 1325, 1329–30 (Fed. Cir. 2006).
The United States Court of Federal Claims interpreted Perri v. United States, 340 F.3d at 1343-44 as follows:
While it is true that the Federal Circuit and Court of Claims have permitted quantum meruit claim recovery, this occurs in the very limited circumstance where a plaintiff provides services or goods to the government pursuant to an attempted express contract, but either some defect prevents an express contract from actually coming into existence or the government simply refuses to pay. See Perri v. United States, 340 F.3d 1337, 1343–44 (Fed. Cir. 2003) (citing Gould, Inc. v. United States, 935 F.2d 1271 (Fed. Cir. 1991); United States v. Amdahl Corp., 786 F.2d 387, 393 (Fed. Cir. 1986); and Prestex, Inc. v. United States, 162 Ct. Cl. 620, 320 F.2d 367 (1963)).
In this type of case, a contract is found if a meeting of the minds can be inferred, “as a fact, from conduct of the parties showing, in the light of the surrounding circumstances, their tacit understanding.” Hercules, 516 U.S. at 424, 116 S. Ct. 981 (quoting Baltimore & Ohio R.R. Co. v. United States, 261 U.S. 592, 597, 58 Ct. Cl. 709, 43 S. Ct. 425, 67 L.Ed. 816 (1923)).
The exception exists only when a contractor in good faith provides goods or services to the government under an express contract that is later rescinded due to invalidity. See United States v. Amdahl Corp., 786 F.2d 387, 393 (Fed. Cir. 1986).
- Unless the validity of the contract is disputed then the quantum meruit exception does not apply.
For help with issues of unjust enrichment and quantum meruit claims in government contract law, call Watson & Associates LLC’s government contract lawyers at 1-866-601-5518 for a FREE Initial Consultation.