This case deals with the requirements needed to survive a motion for dismissal (MD). Spectre Corporation entered into a contract with the National Aeronautics and Space Administration (NASA) under the Nat’l Aeronautics and Space Act to essentially commercialize silicon-carbide sensor patents. According to Spectre’s complaint, it paid NASA $50,000 in exchange for licensing rights for the patented product through January 25, 2025, the patent’s expiration date. After some delays and disagreements, NASA terminated the licensing agreement and allowed the contract under the Space Act to expire.
Spectre brought suit alleging breach of the licensing agreement’s express terms; breach of the Space Act’s express terms; and violation of the implied duty of good faith and fair dealing. NASA responded with a motion to dismiss for failing to state a claim under which relief could be granted. NASA asserted that the disclaimers in both the licensing agreement and the Space Act precluded Spectre’s claims and the damages it sought. Spectre responded to NASA’s MD stating that the disclaimers could not work to preclude Spectre’s claims.
MOTION TO DISMISS DENIED
In denying NASA’s motion to dismiss, the Court recited the standard for surviving a motion to dismiss. “When considering a motion to dismiss brought under RCFC 12(b)(6), the allegations of the complaint should be construed favorably to the pleader.” Scheuer v. Rhodes, 416 U.S. 232, 236 (1974). The Court must inquire, however, whether the complaint meets the “plausibility” standard described by the United States Supreme Court, i.e., whether it adequately states a claim and provides a “showing [of] any set of facts consistent with the allegations in the complaint.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 560, 563 (2007) (hereinafter “Twombly”) (citations omitted). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (hereinafter “Iqbal”) (quoting Twombly, 550 U.S. at 570). (Lawyers frequently refer to this as the Iqbal standard).
BREACH OF CONTRACT CLAIM
Regarding Spectre’s breach of contract claim, the court stated that there were disagreements as to the amount Spector paid NASA and the court was therefore unable to determine whether Spectre had made sufficient payments to trigger milestones under the contract. Without that clarification, the court reasoned, it was reluctant to grant NASA’s motion for dismissal. Spectre also alleged in its complaint that NASA’s reasons for terminating the licensing agreement were pretextual. The court found that Spectre’s and NASA’s account of what happened or diametrically opposed and therefore it could not dismiss Spectre’s claims without further fact-finding.
BREACH OF DUTY OF GOOD FAITH AND FAIR DEALING
In its complaint, Spectre asserted that the duty of good faith and fair dealing is implied in all government contracts and is intended to supplement the express terms of the contract “to prevent a contracting party from engaging in conduct which (while not technically transgressing the express covenants) frustrates the other party’s rights to the benefits of the contract.” (quoting Metcalf Constr. Co. v. United States, 742 F.3d 984, 994 (Fed. Cir. 2014)). The court determined that further inquiry, supported by discovery and testimony was necessary to resolve the issues raised in Spectre’s complaint.
Because the court found that Spectre’s complaint contained a plausible claim for breach of contract and a breach of the covenant of good faith and fair dealing, it denied NASA’s motion for dismissal.
If you are government contractor and have a dispute over the terms of the contract, having an experienced attorney is critical.