Contract Clearly Required Claims to be Submitted Within Two Years of Termination; ASBCA No. 61464, Appeal of Expresser Transport Corporation

The government’s motion for summary judgment on an appeal of the agency’s denial of an indemnification claim is granted, where the underlying contract clearly established a two-year deadline for the submission of claims after the cessation of contract performance, and the claim was submitted years after that date. While the appellant made several arguments why it was not reasonable for the claim—which involved a settlement of a wrongful injury lawsuit—to be time-barred, the board noted that the lawsuit was settled several months before the expiration of the two-year time limit on claims, and therefore there was no reason the appellant could not have submitted a timely indemnification claim.

Expresser Transport Corporation appealed the Military Sealift Command’s denial of its indemnification claim.

Expresser and the government entered into a charter contract to support the prepositioning of military equipment and supplies. Under the contract, Expresser remained responsible for operating the ship, which it contractually accomplished through its parent company, Maersk Line, Limited. However, the government could place civilian contractors aboard for communications and cargo maintenance. The government agreed to indemnify Expresser for liabilities resulting from the carriage of such personnel. The contract also required Expresser to submit any billing within two years of the date the vessel was redelivered, and stated that any claims not submitted within that time limit would be deemed waived.

On May 11, 2007, a government contract employee stationed aboard the vessel suffered an injury leaving him a paraplegic, and later sued the contractor and the government for damages. On July 15, 2009, the government terminated the charter for convenience and redelivered the vessel. In May 2010, the government was dismissed from the lawsuit, and in March 2011, the suit was settled for $2.5 million.

Six years later, Maersk submitted a certified claim seeking reimbursement of the settlement amount and legal fees. The CO denied the claim and this appeal followed. The government moved to dismiss for failure to state a claim upon which relief may be granted.

Simply put, the government argued that the claim was time-barred by the plain language of the contract, as it was submitted more than 2 years after the vessel was redelivered to Expresser.

In response, Expresser argued that it was conceivable that this claim might not have been resolved until more than two years passed after the delivery of the vessel, and therefore it might not have accrued within the time frame. According to Expresser, a claim cannot accrue until the amount of the claim in sum certain is known or should have been known.

Expresser alleged that it functioned under the “assumption” that Article 38 only restricted the time within which “routine” requests for payment could be submitted, and that it believed its indemnification claim was not routine and therefore not restricted by this contract clause.

The board disagreed. While Expresser now claimed the contract clause was unacceptable, it had agreed to this language at contract formation. Further, the court found the language was intended precisely to limit the government’s exposure to delayed claims. Further, the board found that nothing in the contract limited Article 38 to “routine” claims, as Expresser asserted.

Finally, the board noted the scenario Expresser proposed—that its claim might not have accrued until after the 2-year time limit had expired—did not happen. While the parties disagreed on the date the claim accrued, the board held that the latest date was March 21, 2011, the date Expresser settled with the plaintiff. Accordingly, the appellant had until July 15, 2011—the date the 2-year limit expired—to submit its claim, yet failed to do so.

In a supplemental submission, Expresser argued for additional discovery into whether the MSC billing instructions with which claims had to be in accord under Article 38 support its position that an indemnification claim is not within the scope of Article 38. Expresser also implied it needed discovery into other issues, including whether its claim accrued when the contractor employee was injured, whether there is a factual basis for the government’s defense of laches, and whether its CDA certification is defective.

However, the board held Expresser had not met the threshold for additional discovery. Further, the board reviewed the government’s motion as one for summary judgment, which need not be deferred or denied to permit discovery based upon a mere speculative hope that a claimant might find evidence to support its case. The board found it unclear how Expresser hoped further discovery into the billing instructions would help its case. While the billing instructions might dictate the procedures for submitting claims, Article 38 did not provide any basis for them to carve out a class of claims for moneys due that could be excluded from its time limits. Thus, the board concluded that Expresser’s reasons for seeking further discovery did not rise above the level of speculation.

Expresser Transport Corporation is represented by Patrick H. McCaffery, General Counsel. The government is represented by Craig D. Jensen, Navy Chief Trial Attorney, and Robert R. Kiepura, Senior Trial Attorney.