If You’re a JV With a Claim, Make Sure You’re Clear on Which Partner Has Authority to Submit It

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Vladimir Gjorgiev | Shutterstock

The contractor was a joint venture. A VP of one of the JV partners submitted a claim. Then, in a rather extraordinary turn of events, the President of the other JV partner disavowed the claim, telling the agency that the claim was unauthorized, that only he had authorization to make a claim. At some point later, the two JV partners reconciled and decided they wanted to pursue the claim after all. They appealed to the ASBCA, but the board found there was no valid claim. Under the JV agreement, the VP of the partner who submitted did not have authority to submit the claim. The person who had authority never submitted a claim. There was no live claim from which to appeal. 

Appeal of BCC-UIProjects-ZAAZTC Team JV, ASBCA No. 82846

Background

BCC-UIProjects-ZAAZTC Team JV (B-U-Z)had a contract with the government for construction of a police facility in Afghanistan. B-U-Z was a joint venture between Behnam Construction Company (BCC) and Zamarai Ali Ahmad Zada General and Trading Construction Company (ZAAZTC). B-U-Z’s joint venture agreement stated that BCC’s President would represent the parties to the government.

After the contract was completed in 2014, the Corps received a request for an equitable adjustment executed by the Vice President of ZAAZTC, seeking costs on behalf of the JV for design delays and differing site conditions. The Corps denied the request for lack of substantiation.

Following that denial, the Corps received a letter from BCC’s President, disavowing the REA submitted by ZAAZTC. The letter stated that he was the only authorized JV representative that could submit claims.

Despite the letter from BCC’s President, ZAAZTC submitted a second REA on behalf of the JV in 2015, for differing site conditions. The Corps denied the second REA on the ground that ZAAZTC’s Vice President lacked the authority to represent the JV.

Several months later BCC and ZAAZTC entered a settlement agreement, stating that they would split any monies received from the JV’s claims.

BCC’s President then emailed the agency in 2016 stating that the JV’s internal dispute had been resolved. BCC’s Presdient requested that the agency now address the 2015 REA. The Corps informed BCC and B-U-Z that the 2015 REA was no longer live.

Not much happened for several years. But in 2021, B-U-Z filed an appeal with the ASBCA of what it considered to be its denial of the 2015 claim. The government moved to dismiss.

Legal Analysis

  • There Was No Claim Submitted by B-U-Z – The party to the contract was the JV, B-U-Z. The CDA requires that the person who submits a claim has authority to bind the contractor. Here, the 2015 claim/REA had been submitted by ZAAZTC’s Vice President. But under the terms of B-U-Z’s JV agreement, only BCC’s President had authority to bind the JV. BCC’s President had never submitted a claim. As a result, there was no valid claim that could be appealed.
  • B-U-Z Didn’t Retroactively Authorize Claim – B-U-Z attempted to argue the settlement executed by the JV partners in 2016 retroactively authorized the claim. The board disagreed, noting the settlement agreement simply purported to split proceeds from a claim between the parties. Nothing in the agreement retroactively authorized the 2015 claim.
  • Appeal Was Untimely – Even if the board were to accept that the 2015 REA was a valid, authorized claim. The appeal was untimely. An appeal of a denied claim must be brought within 90 days of the denial. The Corps denied the claim in 2015. B-U-Z didn’t file an appeal until 2021.

B-U-Z is represented by Patrick B. Kernan of Kernan & Associates, PLLC. The government is represented by Michael P. Goodman, Rebecca L. Bockmann, and Michael E. Taccino of the Army Corps of Engineers.

ASBCA - BCC-UIProjects