Last Week in the Federal Circuit (November 15-19): Government Contracts - A Bridge Too FAR on Termination for Convenience

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Although the Federal Circuit did not issue a precedential patent decision this week, there was still plenty of activity, including three grants of mandamus to transfer cases out of the Western District of Texas. Below we provide our usual weekly statistics and our case of the week—our highly subjective selection based on whatever case piqued our interest.

Precedential opinions: 0 (in patent cases; 1 precedential decision in an appeal from the Court of Federal Claims)

Non-precedential opinions: 16

Rule 36: 5

Longest pending case from argument: Knapp v. MSPB, No. 20-2122 (160 days)

Shortest (non-Rule 36) pending case from argument: Uniloc 2017 LLC v. Facebook, Inc., No. 19-2162 (14 days)

Case of the week: JKB Solutions and Services, LLC v. United States, No. 21-1257

Panel: Chief Judge Moore and Judges Newman and O’Malley, with Judge O’Malley writing the opinion.

You should read this case if: you have a matter involving service contracts with the United States government under the Federal Acquisition Regulation (FAR).

In this week’s case, appellant JKB had entered into a contract with the U.S. Army to provide instructor services. Under the agreement, the Army placed annual task orders for JKB with the total price corresponding to the price for JKB to teach fourteen classes. However, the Army used JKB for fewer than fourteen classes each year. The Army paid JKB only for the classes that JKB actually taught, rather than the total price on the task orders. JKB sued for breach of contract.

The U.S. government moved for summary judgment arguing that the contract incorporated a specific FAR provision that included a termination-for-convenience clause: “[t]he Government reserves the right to terminate this contract, or any part hereof, for its sole convenience.” The Court of Federal Claims found that this FAR provision applied, the Army constructively terminated the contract for convenience, and JKB could recover only costs associated with the termination-for-convenience rather than the entire amount under the original task orders.

The Federal Circuit vacated and remanded. It agreed with JKB that the disputed FAR provision applies to only commercial item contracts, not service contracts like JKB’s. The Court rejected the Claims Court’s rationale that “nothing in the FAR limits the [provision’s] applicability to commercial item contracts,” noting instead that multiple FAR provisions limit the disputed provision to commercial item contracts. The Court also pointed out that the FAR limits other termination-for-convenience clauses to specific types of contracts, reinforcing that there was no blanket termination-for-convenience provision.

Nor was the Federal Circuit persuaded that the parties had bargained for a termination-for-convenience clause in this specific contract by incorporating the disputed FAR provision. The parties’ agreement did not transform the provision into one applicable to a service contract. That was true even if it meant that the government incorporated a clause with no effect into the JKB contract.

Despite JKB’s win on appeal, its fight against the alleged termination for convenience continues. The Federal Circuit remanded for the Claims Court to consider in the first instance whether there were other bases, besides the disputed FAR provision, that would authorize the government to terminate for convenience.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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