by Scott P. Fitzsimmons, Associate

The U.S. Court of Appeals for the Federal Circuit recently held that a contractor must file a certified claim to defend itself against liquidated damages. See M. Maropakis Carpentry, Inc. v. U.S, 609 F.3d 1323 (Fed. Cir. 2010). Ordinarily, contractors and lawyers associate a certified claim with affirmative claims, not defenses. In fact, the Contract Disputes Act (“CDA”) requires a contractor to file a properly certified claim in order to recover excess costs or to significantly modify a contract. The Federal Circuit’s recent decision, therefore, blurs the distinction between “affirmative claims” and “defenses” and now requires a contractor to file a certified claim before the Court may even consider a contractor’s defense. Basing its decision upon jurisdictional grounds, the Federal Circuit sent a strong warning to contractors and to government contract attorneys that, when in doubt, always file a properly certified claim before filing a complaint.

Facts Of The Case

In 1999, the U.S. Navy awarded a contract to M. Maropakis Carpentry, Inc. (“Maropakis”) for warehouse renovations in Mechanicsburg, Pennsylvania. The $1.2 million contract included the liquidated damages clause provided by 48 C.F.R. § 52.211-12. The clause required Maropakis to be liable to the government for $650 per day for each day of delay beyond the contract completion date. Unfortunately, Maropakis encountered multiple delays, did not begin work until after the specified completion date, and eventually completed the project 467 days late. After project completion, the parties exchanged several letters addressing the delays. The exchange began with a request by Maropakis for an extension of contract time based upon alleged government and uncontrollable delays. Notably, Maropakis failed to certify its request in the form required by the Contract Disputes Act (“CDA”), 41 U.S.C. § 605. Maropakis also failed to request a Contracting Officer’s final decision. Upon receipt of Maropakis’ request, the government rejected each of the extensions. The Contracting Officer also invited Maropakis to submit additional information and emphasized that his letter was not a final Contracting Officer’s decision. Maropakis never responded to the government’s letter and never submitted additional information.

In June 2002, almost a year after contract completion and having received no response from the contractor, the government informed Maropakis that it would owe the government $303,550 in liquidated damages. The damages represented $650 per day for the 467 days of delay in completing the Project. Maropakis responded to the government’s liquidated damages claim, repeated its previous request for an extension of time, and stated that it would dispute the government’s allegations. Again, however, Maropakis failed to certify its letter and failed to request a final Contracting Officer’s decision.

In December 2002, the U.S. Navy issued a Contracting Officer’s final decision, reiterating its demand for liquidated damages. The decision focused solely upon the government’s claim for liquidated damages and did not address any of the contractor’s requests for extensions of time.

Trial Court Proceedings

Maropakis filed its complaint in the U.S. Court of Federal Claims in December 2003 alleging two counts: (i) breach of contract due to the government’s delay; and (ii) breach of contract due to the government’s assessment of liquidated damages. In response, the government asserted a counterclaim seeking remission of the full $303,550 in liquidated damages.

The government moved to dismiss Maropakis’ affirmative claim for lack of subject matter jurisdiction, arguing that Maropakis had failed to file a properly certified claim for either damages or delay. Adhering to long-standing case law, the court granted the government’s motion to dismiss, finding that none of Maropakis’ letters met the requirements for a properly certified claim as required by the CDA, 41 U.S.C. § 601-613. The trial court’s dismissal of Maropakis’ affirmative claims was to be anticipated. As discussed above, the CDA requires a contractor seeking affirmative damages to file a properly certified claim for the court to have jurisdiction.

The trial court, however, went one step further and granted the government’s motion for summary judgment on its liquidated damages claim. The court reasoned that Maropakis’ only defense to liquidated damages was the alleged government caused delays. Since Maropakis failed to submit a certified claim for an extension of time, the court had no jurisdiction to consider that defense and issued summary judgment in the government’s favor. Maropakis appealed the court’s decision.

The Appeal

On appeal, the Federal Circuit upheld the trial court’s ruling and found that Maropakis’ letters failed to adhere to the CDA requirements for a certified claim. In particular, the letters failed to request a sum certain, failed to identify the number of days of delay, and failed to request a final Contracting Officer’s decision. Thus, the Federal Circuit found that the trial court had no jurisdiction over Maropakis’ delay claims presented in its letters.

More importantly, however, the court also held that Maropakis could not raise governmentcaused delays as a “factual defense” to the government’s liquidated damages claim. In short, the Federal Circuit found that the contractor’s factual defenses and its delay claim were essentially the same. Thus, Maropakis was required to file a certified claim in order for the court to have jurisdiction over its defense. The court based its opinion on several previous cases, but made its decision clear by stating: “[W]e hold that a contractor seeking an adjustment of contract terms must meet the jurisdictional requirements and procedural prerequisites of the CDA, whether asserting the claim against the government as an affirmative claim or as a defense to a government action.” Maropakis, 609 F.3d at 1331.

The Federal Circuit’s opinion was not delivered without a strong and compelling dissent. In her dissenting opinion, Judge Newman criticized the majority by pointing out that, in response to the government’s claim, Maropakis was not seeking damages, a contract modification, or additional compensation. Maropakis was simply raising an objection to the merits of the government’s claim for delay damages, defending on the ground that the government contributed to the delay. Thus, Maropakis need not identify a “sum certain” because it was not claiming a “sum.” According to Judge Newman, failure to meet the CDA requirements for certification, naming a sum certain, requesting a final decision, or modifying the contract does not preclude defending against a government claim.

Contractors Be Forewarned

Despite a compelling dissent, Maropakis is now precedential and the decision serves as a stern warning to contractors that the failure to file a certified claim in response to liquidated damages may prohibit an effective defense. The Maropakis decision undoubtedly blurs the line between a “defense” and a “claim.” Yet, contractors can learn from the decision and should modify their future dealings with the federal government accordingly. Specifically, contractors and their attorneys must be ever more diligent when responding to a liquidated damages claim to ensure that the contractor’s rights are fully protected. Whenever a contractor responds to a Contracting Officer’s final decision, it should also consider whether its defense may seek to modify the contract, even if it does not seek monetary compensation. If so, the contractor should consider filing a certified claim to ensure it fully preserves all of its defenses.

The information or opinion provided in this article is the author's own and not necessarily that of Watt, Tieder, Hoffar & Fitzgerald, LLP. The author is solely responsible for the information and opinion that he or she has provided. The information contained herein does not replace seeking specific legal counsel to directly address individual client needs.