Federal Circuit Reverses ASBCA, Holds Board Miscalculated the Date on Which Contractor’s Claim Accrued; Triple Canopy, Inc. v. Secretary of the Air Force, Fed. Cir. 2020-2165

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ASBCA decision finding that contractor’s claims were barred by the statute of limitations is reversed. The contractor sought reimbursement for fees assessed against it by the Afghan government. The board had found that the claim for those fees accrued when they were assessed, not when they were paid. The Federal Circuit rejected the board’s reasoning. The contract required the contractor to seek an exemption from any fees imposed by a foreign government. Here, the contractor appealed the assessment seeking an exemption. The contractor’s claim did not accrue until that appeal had been resolved. Because the contractor had filed its claim within six years of the resolution of the appeal, its claim was timely.

Triple Canopy, Inc. had six contracts with the Department of Defense to provide security in Afghanistan. The government of Afghanistan issued a directive limiting the number of security personnel provided by a single company to 500. Triple Canopy’s contracts required the company to provide more than 500 personnel. The U.S. government asked the Afghan government to exempt Triple Canopy from the 500-person cap.

But instead of granting an exemption, the Afghan government assessed a fee against Triple Canopy for each person over the 500-person cap. On March 11, 2011, the Afghan government directed Triple Canopy to pay $879,000 in fees for each person over the personnel limit. Triple Canopy appealed the assessment with the Afghan government. The Afghan government ultimately reduced the assessment to $430,000. Triple Canopy paid the assessment in July 2011.

In June 2017, Triple Canopy submitted claims to the U.S. government seeking reimbursement for the fees it paid to the Afghan government. The U.S. government did not respond to the claims. Triple Canopy appealed the deemed to denial of its claims to the ASBCA.

The ASBCA, however, found that Triple Canopy’s claims were barred by the CDA’s six-year statute of limitations. The board reasoned that the legal basis for Triple Canopy’s claims was the contract’s Foreign Tax Clause, which provides that the contract price shall be increased in the amount of any “after-imposed tax” that the contractor is required to pay. If the Afghan’s government’s assessment was an after-imposed tax, then Triple Canopy’s obligation to pay it arose in March 2011, when the Afghan government directed the company to pay the assessment. Accordingly, any claim Triple Canopy had against the U.S government for reimbursement of the assessment accrued in March 2011. Because Triple Canopy filed its claims in June 2017, more than six years after March 2011, they were time-barred. 

Triple Canopy appealed to the Federal Circuit. Triple Canopy argued that the events that fixed its liability had not occurred in March 2011. In particular, Triple Canopy contended that it had to appeal the assessment with the Afghan government before its liability for the assessment had fixed. It was only in July 2011, after the company’s appeal (and after it was ordered to pay the discounted assessment) that the claim accrued.

The court agreed with Triple Canopy. The court noted that under the FAR, a claim accrues when all the events that fix liability have occurred. For liability to be fixed, some injury must have occurred. The court also noted that the contract’s Foreign Tax Clause provides that the government is required to reimburse the contractor for any after-imposed tax. But the government is only liable under that clause if the contractor takes all reasonable action to obtain an exemption from the tax.

In this case, Triple Canopy took reasonable action to obtain an exemption from the assessment—it submitted an appeal to the Afghan government. This appeal was a mandatory pre-claim procedure that had be completed before Triple Canopy’s claim accrued for the statute of limitations. Because the appeal with the Afghan government was not resolved until July 2011, the claim did not accrue until July 2011.

The board seemed to think that an appeal of the assessment was optional and did not impact the fixing of liability. But the court reasoned that DoD itself had repeatedly requested an exemption for Triple Canopy and had indicated that such an exemption would be valid. Having been informed by DoD that it was considered to have a valid exemption from the 500-person cap, Triple Canopy could not properly disregard the Tax Clause’s requirement that it take all reasonable to obtain an exemption.

The government argued that the Foreign Tax Clause only requires a contractor to take “reasonable action” to obtain an exemption, and that Triple Canopy’s appeal was not a reasonable action because it never had a legal basis for the exemption. It was undisputed that the company had more than 500 personnel in Afghanistan. Thus, Triple Canopy was not obligated to pursue an exemption that did not exist.

The court rejected this argument. Again, DoD itself had requested an exemption for Triple Canopy on the grounds that it was necessary to avoid a disruption in the Afghan reconstruction project. Seeking an exemption to avoid a disruption in the reconstruction process was tantamount to having a legal basis to pursue the exemption. Indeed, the court noted, while Triple Canopy’s appeal did not result in an exemption, it did result in a substantial reduction of the assessment. The court opined that “the government’s suggestion that the appeal was somehow meritless is difficult to fathom.”

Triple Canopy is represented by Jonathan David Shaffer, Todd Matthew Garland, and Richard C. Johnson of Smith Pachter McWhorter, PLC. The government is represented by Nathanael Yale, Jeffrey B. Clark, Robert Edward Kirschman, Jr., and Patricia M. McCarty of the Department of Justice.

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