Government’s motion to dismiss an appeal for lack of subject matter jurisdiction is denied, where a novation agreement between the appellant, the original contractor, and the government did not preclude the appellant from pursing claims that accrued prior to the novation agreement.
The government moved to dismiss Coopoer/Ports America LLC’s appeal on the grounds that CPA was not the “contractor” within the meaning of the Contract Disputes Act at the time the claim accrued. CPA opposed the government’s motion, arguing that under the novation agreement executed by the government, it had the legal right to assert claims that pre-date the novation agreement.
In 2015, the government awarded Shippers Stevedoring Co. a contract for stevedoring and related terminal services. After Shippers experienced financial difficulty, it sought another firm to take over the contract. In 2016, CPA, Shippers, and the government executed a novation agreement effective September 30, 2016, and CPA assumed performance on October 1.
Since that date, CPA filed a number of claims against the government. The claim at issue alleges a unilateral mistake in bid, based, in part, on the fact that Shippers’ bid was 63 percent below that of the next lowest bidder, Ports America, one of CPA’s owners, and contained mistakes that should have been apparent to the government.
In its motion to dismiss, the government argued that CPA lacks the required privity of contract to qualify as a “contractor” with standing to pursue a claim that accrued at a time that it was not a party to the contract. According to the government, in order for the board to find a valid government waiver of the statutory prohibition against assignment of claims, there would need to exist an express assignment of that claim to which the government consented.
In response, CPA argued that the plain language of the novation agreement and legal precedent make it clear that CPA, as the successor in interest under the contract, has the right to assert a claim accruing prior to the novation.
The board examined the novation agreement, in which Shippers waived any claims and rights it might have against the government, and the government recognized CPA as the successor in interest in and to the contracts, entitled to all rights, titles and interests of the Transferor in and to the contracts as if the Transferee were the original party to the contracts.
The board noted that is has previously held that a successor in interest under a novation agreement, pursuant to which it is “entitled to all the rights” of its predecessor as if it were “the original party” to the contract, is recognized by the government as the successor in interest for all purposes, including the right to pursue any claims its predecessor could have pursued.
Notwithstanding the board’s conclusion, the government maintained there must be an express assignment of a claim, to which the government consented, in order for the board to find a valid government waiver of the statutory prohibition against assignment of claims.
ASBCA disagreed, finding that the government, through the novation agreement, expressly recognized CPA as the “contractor,” and recognized that CPA was “entitled to all rights, titles and interests of the Transferor in and to the contracts as if the Transferee were the original party to the contracts.” According to the board, interpreting this recognition as excluding CPA’s right to pursue a claim accruing to the original contractor would be unreasonable. The board also doubted the government would agree with its own interpretation if the tables were turned, and CPA argued that its obligations were so limited.
The board found it irrelevant that the provision entitling the transferee to “all rights, titles, and interests” of the transferor did not expressly include the word claims, and rejected the government’s contention that the absence of the word “claims” was purposefully limiting.
Cooper/Ports America LLC is represented by W. Barron A. Avery, William T. DeVinney, William B. O’Reilly, and Katherine L. McKnight of BakerHostetler LLP. The government is represented by Jeffrey P. Hildebrant, Air Force Deputy Chief Trial Attorney, and by Caryl A. Potter III; Lieutenant Colonel Byron G. Shibata, USAF; Major Sondra B. Nensala, USAF; Christopher S. Cole, and Danielle A. Runyan, Trial Attorneys.
