The contractor assigned its contract payments to a lender and modified the contract so the government would pay the lender directly. Later, the contractor wanted out of the assignment. The contractor executed a unilateral release of assignment and sent it to the agency. The agency refused to accept the unilateral release. The contractor stopped performing, so the board terminated for default. On appeal of the termination, the contractor argued that the government should have accepted the release of assignment to protect the contractor from a predatory lender. But the CBCA found the government had no duty to protect a contractor. Only an assignee can release an assignment. The government had no obligation to accept a unilateral release from the contractor-assignor and no duty to step into a dispute between a contractor and its lender.
Heroes Hire, LLC v. Department of Veterans Affairs, CBCA 7195, 7211
Background
Heroes Hire, LLC had a contract to provide nursing services with the Department of Veterans Affairs. Shortly after receiving the contract, Heroes executed a document assigning payments under the nursing contract to a lender, Factors Southwest. Heroes changed the banking information in the company’s SAM account so that contract payments would be made directly to Factors.
Heroes sent the assignment document to the VA. After some initial hesitancy, the VA recognized the assignment, modified the contract, and began to make payments to Factors.
A couple of months later, however, Heroes wanted out of the assignment. Heroes asked Factors to sign a release of assignment. Factors refused. So Heroes executed its own unilateral release of assignment. Heroes sent the unilateral release to the VA asking that payments now be made to Heroes instead of Factors. But the VA refused to accept a unilateral release, reasoning that only the assignee, Factors, could release the assignment.
In light of the VA’s refusal, Heroes instructed its nurses to not return to work. Consequently, the VA terminated the contract for default. Heroes appealed to the CBCA. The VA moved for summary judgment.
Legal Analysis
- Heroes Defaulted – In an appeal of a termination, the government bears the initial burden of establishing that the contractor has defaulted. Here, the VA satisfied that burden. The contract provided for nursing services to help with COVID-19. Heroes stopped providing nurses and not only violated the terms of the contract, but deprived the VA of nurses during a pandemic.
- Heroes Default Was Not Excused – Heroes main defense to the default was the government improperly failed to recognize the self-release of the assignment. Indeed, Heroes alleged the government should have recognized the release to protest the company from a predatory lender. But the board reasoned that only an assignee can release an assignment. Heroes executed a bilateral assignment and contract modification that allowed Factors to receive contract payments. The VA could not simply void the assignment on Heroes say-so. Whie Heroes was in a difficult position with Factors, it had no right to demand that the VA step into the middle of that dispute and take actions that could expose the agency to liability.
Heroes Hire is represented by Jessica House, its CEO. The government is represented by Kathleeen Ellis-Ramos of the Department of Veterans Affairs.
