Federal Circuit Holds that Blanket Purchase Agreement Is Not a Binding Contract; McLeod Group, LLC v. United States, Fed. Cir. 2020-1389

99

COFC decision dismissing claim for lack of subject matter jurisdiction is affirmed. The contractor claimed that the government had executed a blanket purchase agreement (BPA) in bad faith. The COFC dismissed the suit for lack of subject matter jurisdiction, finding that a BPA is not an enforceable contract. On appeal, the contractor argued that the COFC held it to an improperly heightened pleading standard, requiring it prove the existence of a contract rather than simply making a non-frivolous allegation that a contract existed. The Federal Circuit rejected the argument reasoning that the COFC may dismiss for lack of jurisdiction when an agreement is plainly not a binding contract. Here the BPA was unenforceable on its face. The document expressly stated it was not a contract. Moreover, the BPA did not require the government to perform and thus lacked consideration.

McLeod Group, LLC had a blanket purchase agreement with the Department of Homeland (DHS) Security to provide management consultant services. DHS issued seven task orders under the BPA to McLeod.But McLeod submitted a claim alleging the agency had failed to execute its contractual duties under the BPA in good faith by not issuing additional task order to McLeod.

DHS denied the claim, and McLeod filed suit with the Court of Federal Claims. The COFC, however, found that lacked jurisdiction to hear the suit. To invoke the jurisdiction of the COFC under the Tucker Act, a contractor must show that its claims arose out of a contract with the United States. The COFC determined the BPA was not a contract with the government that could establish subject matter jurisdiction. McLeod appealed to the Federal Circuit.

On appeal, McLeod argued that the COFC erred in applying a heightened pleading standard that required the company to establish the existence of a contract rather than merely a non-frivolous allegation of a contract with the government. McLeod contended that the COFC’s jurisdiction was not defeated by averments that may fail to state a cause of action. If that was the case, the COFC could dismiss for failure to state a claim but not for lack of jurisdiction. McLeod asserted that it had sufficiently alleged that the BPA was a contract and that this was enough for the COFC to have jurisdiction.

The Federal Circuit was unpersuaded. The COFC may dismiss for lack of jurisdiction if the plaintiff fails to present a non-frivolous allegation that the underlying contract exists. If an agreement is plainly not a contract on its face, then it is insufficient to establish subject matter jurisdiction.

Here, the court held that the BPA was unenforceable on its face. First, the agreement lacked mutuality of intent. The BPA explicitly stated that the agreement was “not a contract” with the government. The fact that task orders issued under the BPA are contracts, does not make the BPA itself a contact.

Additionally, the BPA lacked mutuality of consideration. McLeod had not identified any performance obligation placed on the government. The BPA itself stated the agreement does not obligate any funds, which negated the idea of a contract. Moreover, the BPA did not even require the government to place task orders. Offering an opportunity for task orders does not constitute consideration.

McLeod is represented by Richard P. Rector, Thomas Edward Daley, and Dawn Stern of DLA Piper LLP as well as Joshua B. Duvall of Matross Edwards, LLC. The government is represented by Sonia W. Murphy, Jeffrey B. Clark, Robert Edward Kirschman, and Patricia M. McCarthy of the Department of Justice.

Fed Circuit - McLeod Group