Government Contracts Dissolved LLC Had Standing to Pursue Appeal
Wednesday, December 12, 2018

Dissolved LLC Had Standing to Pursue Appeal

By Government Contracts Editorial Staff

A dissolved limited liability company had standing to appeal a termination for cause because, according to the Armed Services Board of Contract Appeals, under state law the company continued to exist with the power to prosecute or defend proceedings. The contractor appealed the termination for cause of an order issued under a blanket purchase agreement for the delivery of nonstandard weapons and related items to Afghanistan. In making the termination decision, the contracting officer cited the contractor’s failure to comply with the order’s terms and conditions and to provide the government with adequate assurances of future performance. The government argued the contractor lacked standing to pursue the appeal because it ceased to exist under the terms of its operating agreement when it sold substantially all of its assets, and that under state law, it continued to function for the sole purpose of winding up its business operations. The government further argued that, as dissolved, the contractor was a shell company that could not perform the order and that it transferred contract administration to a sister company, which lacked the licenses required to perform the contract.

Legal Capacity. The contractor had the burden to prove standing, a jurisdictional prerequisite, which involves an inquiry into “whether the [claimant] constitutes the type of person or party that may submit the case or controversy proffered for consideration” (12-1 BCA ¶34,988). To determine which of the contractor’s rights and powers survived post-dissolution, the board applied the laws of the state where it was organized. Under the pertinent statutory provisions, as a dissolved company, the contractor continued to exist with the power to prosecute or defend proceedings in its name. Therefore, the contractor had the legal capacity to prosecute the appeal. The government’s argument that the contractor could not perform after its dissolution pertained to the merits of the dispute and not to the issue of standing. (Bulova Technologies Ordnance Systems LLC, ASBCA, ¶95,617).

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