By Government Contracts Editorial Staff
The government’s motion for leave to amend its answer to add an affirmative defense was partially denied by the Armed Services Board of Contract Appeals because it was legally impossible for the government to raise prior material breach as a defense and amendment would be futile. The appeal involved the government’s disallowance of the contractor’s legal proceeding and settlement costs. The contractor was the successor in interest on a contract for translation services at Abu Ghraib prison in Iraq. After Iraqi plaintiffs filed a lawsuit against the contractor and its predecessor alleging that the contractor’s employees participated in the abuse of the plaintiffs at the prison, the contractor defended and settled the lawsuit. It then sought to recover the costs related to the litigation, which the government had disallowed. On appeal, the government sought to amend its answer to include the affirmative defense of prior material breach. According to the government, it would invoke this defense if the board concluded “any part of the claimed costs [were] allowable and hence properly payable to [the contractor].”
Unsupported Position. Board precedent requires denial of a motion to amend where amendment would be futile to the extent that a party cannot prove any set of facts in support of a claim or defense that would entitle it to relief (see 17-1 BCA ¶36,743 and 04-1 BCA ¶32,518). The government argued it should be allowed to assert prior material breach because, if the board found that the legal proceedings and settlement costs in question were allowable, it could defend against that finding with evidence of a prior and not necessarily related material breach by the contractor. However, the government cited no precedent in support of its position. Accordingly, it was a legal impossibility for the government to raise prior material breach as a defense against what the government admitted was essentially the possibility that its own claim may fail. Moreover, allowing the defense would constitute undue prejudice to the contractor. The board, however, stated the government could present evidence of the abuse of any Iraqi plaintiff in the underlying litigation committed by contractor employees to support either its claim of contract breach or to demonstrate that the plaintiffs would likely prevail on the merits, either of which would support the government’s claim that the legal proceedings costs were unallowable. (Engility, LLC, ASBCA, ¶95,864)
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