Claims Against Government Arose Out of Contracts Entered During World War II. Why Weren’t the Claims Barred by Laches?

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Several oil companies entered contracts with the government during World War II to provide aviation gasoline. In exchange for the gas, the government promised to indemnify oil companies for any law that imposes costs for the clean-up of wartime gas. Decades later, the oil companies sued the government for breach, alleging they had incurred costs related to wartime gas under CERCLA and other environmental laws. The government asserted an affirmative defense of laches. The court, however, found that laches was not an affirmative defense. Laches cannot bar a claim asserted during a statutory limitations period. Here, the companies’ claims had been brought under the Contract Settlement Act. That Act had no limitations period, so laches was not a viable defense.

Chevron U.S.A. Inc. et al. v. United States, COFC No. 20-1784

Background

During World War II, the government entered contracts with oil companies to produce high-octane aviation gasoline. In exchange for the gas, the government promised to indemnify the oil companies for any future-enacted laws that imposed costs on the companies for clean-up of the wartime produced gas.

Decades after the war, Congress passed the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and other laws governing clean-up hazardous waste. The oil companies claimed they incurred expenses under these laws relating to the wartime aviation gas. In accordance with the Contract Settlement Act, the oil companies filed claims with the General Services Administration. GSA denied the claims, so the oil companies filed suit against the government in the Court of Federal of Claims. The government asserted various affirmative defenses against the companies’ claims. The companies moved for summary judgment on the government’s affirmative defenses.

Court’s Analysis

Laches

The government asserted the affirmative defense of laches, arguing that the companies had delayed in bringing suit. The court, however, reasoned that laches cannot bar a claim that has been asserted within a limitations period specified by Congress. Here, the Contract Settlement Act, under which the claims were brought, essentially sets forth an unlimited limitations period. The Act states that a contractor can bring a suit “whenever” it was aggrieved by findings of an agency. This indicated that Congress had not intended to impose a time limit on contractors. The court entered summary judgment on the latches defense.

Contributory Negligence

The government also asserted a defense of contributory negligence, arguing that the oil companies may have incurred costs from their own negligence. The court denied summary judgment on this defense, finding there was an issue of fact as to whether the parties had intended to indemnify the oil companies for their own negligence.

Proximate Cause

The government contended that some of the costs incurred by the oil companies were not proximately caused by the gasoline contracts. The court denied summary judgment on this defense, finding there was factual issue as to whether the contract covered unforeseeable damages.

Insurance Offset

The government contended its liability under the contracts should be offset by any insurance payments the oil companies had received. The court granted the oil companies summary judgment on this defense reasoning that any offset from insurance payments was too remote to be relevant to calculating damages for the government’s alleged breach.

Prior Material Breach

The court denied summary judgment on this defense, reasoning that discovery may reveal post-formation modifications to the parties’ duties, which the oil companies may have breached.

Plaintiffs are represented by Michael W. Kirk, Vincent J. Colatriano, J. Joel Alicea, and Tiernan B. Kane of Cooper & Kirk as well as by Christopher H. Marraro and Bridget S. McCabe of Baker & Hostetler LLP. The government is represented by Matthew P. Roche, Brian M. Boynton, Patricia M. McCarthy, and Franklin E. White of the Department of Justice.

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