Did an Exculpatory Clause Absolve the Government’s Breach?

The government said its breach was excused by an exculpatory clause in the contract. The court, however, refused to apply the clause. An exculpatory clause cannot protect the government from its own breach. 

Manitou Island Transit, LLC. V. Unite States, COFC No. 21-953 

• The Claim – The contractor provided ferry services at a national park. The contractor submitted a claim, alleging the government’s failure to dredge around the docks made performance impossible. The contractor sought $500,000 in damages. The government denied the claim. The contractor filed suit with the COFC 
• Detrimental Reliance – The contractor alleged it had detrimentally relied on the government’s promises to maintain the docks. The court dismissed this claim for lack of jurisdiction. Detrimental reliance is a claim for promissory estoppel. The COFC lacks jurisdiction over a claim for promissory estoppel. Promissory estoppel requires a finding or a contract-implied-in-law against the government for which there has been no waiver of sovereign immunity. 
• Breach of Contract – The contractor also alleged the government breached. The court agreed. The contract required the government to maintain docks for the ferries. Maintaining the docks clearly required dredging so the docks could remain productive. The government did not dredge and thus breached.  
• Act of God – The government argued its failure to dredge should be excused by an Act of God—that is, unprecedented high water levels. The court rejected this argument, finding the government had anticipated high water levels. 
• Exculpatory Clause – The government claimed its breach was excused by an exculpatory clause. The clause stated that in the event of suspension, no compensation is due to the contractor. The government argued the contractor requested a suspension, which negated any liability for breach. But the court reasoned an exculpatory clause cannot insulate the government from its own breach. The government cannot limit its liability for its own unreasonable behavior. The clause did not apply. 

The contractor is represented by Douglas E. Fierberg of The Fierberg National Law Firm. The government is represented by Ebonie J. Branch of the Department of Justice and Colleen M. Burnidge of the Department of the Interior. 

Case summary by Craig LaChance, Senior Editor