Board Rebuffs Agency’s Attempt to Weaponize Defective Termination Notice; Appeal of Ultra Electronic Ocean Systems, Inc., ASBCA No. 62804

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Government’s motion to dismiss appeal is denied. The government sent a letter to the contractor terminating the contract for default. The letter did not include a notice of appeal rights. The contractor appealed the termination, but the government moved to dismiss arguing that the initial termination was not a final decision so the board lacked jurisdiction over the appeal. The board rejected this argument, reasoning that the lack of appeal notice in the decision did not make it invalid. The government also argued that it had issued a second termination notice that mooted the appeal. The board rejected that argument too, reasoning that the government had not retreated from its initial termination decision. Moreover, the contractor had never indicated that a second, proper termination notice would somehow satisfy its appeal.

Ultra Electronic Ocean Systems had a contract with the Navy to design and manufacture a torpedo system test set. On November 16, 2020, the Navy sent Ultra a letter entitled Notice of Intent to Terminate for Default. In that letter, the Navy informed Ultra that it considered Ultra to be in breach, and that the agency was exercising its right to terminate the contract. The letter did not contain a recitation of the contractor’s appeal rights.

Ultra appealed the termination decision. The government, however, moved to dismiss the appeal arguing that board lacked jurisdiction because the November 16, 2020, letter was not a final decision.

Shortly after it filed the motion, the government issued a new Notice of Termination for default. The government then filed a second motion to dismiss, arguing that the new termination notice mooted the appeal. The government reasoned that in its complaint, Ultra had asked the board to direct the Navy to issue a final decision that properly focused the legal and factual issues. The Navy argued that this new termination satisfied the relief that Ultra requested, so the appeal was now beside point.

The board rejected both of the government’s motions. With regard to the first motion, the board reasoned that the November 16, 2020, letter was a final decision that terminated the contract. That letter was entitled Notice of Intent to Terminate, and the letter unequivocally stated that the Navy was exercising its right to terminate the contract. The absence of appeal rights did not change the outcome. The failure to include appeal rights does not render an otherwise valid decision invalid.

The board also disagreed with the government’s claim that the second termination letter mooted the appeal. Ultra’s request that the government file a complaint did not withdraw the appeal or concede Ultra’s challenge to the contract termination. Additionally, the new notice of termination did not extinguish the dispute between the parties. Indeed, the new notice did not retreat from the November 15, 2020, termination, and Ultra had never represented that a the issuance of a new final decision would satisfy its appeal.

Ultra is represented by Thomas A. Lemmer, Phillip R. Seckman, and Lisette Washington of Dentons US LLP. The government is represented by Craig D. Jensen, Richard C. Dale II, and Audra Medeiros of the Navy.

ASBCA - Ultra Electronic Ocean Systems