Government Contracts Subcontractor’s Takings Claim Survives Motion to Dismiss
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Monday, November 25, 2019

Subcontractor’s Takings Claim Survives Motion to Dismiss

By Government Contracts Editorial Staff

A takings claim was not barred by 28 USC 1502, according to the Court of Federal Claims, because the claim did not grow out of or depend on the terms of an executive agreement between the United States and Iraq governing the withdrawal of U.S. troops. The dispute arose from a LOGCAP III subcontract to provide catering services to the Army at FOB Warrior in Kirkuk, Iraq. The subcontractor’s parent corporation had previously constructed a temporary dining facility at the base. In April 2011, less than a year after performance commenced, the prime contractor and the Army began negotiations to purchase the facility from the subcontractor, but the parties could not agree on a purchase price. Later that year, Army legal counsel determined that the facility constituted “real (and non-relocatable) property” under the executive agreement and the facility was the property of the Iraq government. At the end of 2011, the Army excluded the subcontractor from the dining facility and utilized the buildings and equipment for its own purposes without making lease payments. Although the base was subsequently turned over to the Iraq government, a portion the base, including the dining facility, continued to operate under U.S. military command. The government moved to dismiss the subcontractor’s Fifth Amendment takings claim pursuant to 28 USC 1502, which prevents the court from exercising jurisdiction over “any claim against the [U.S.] growing out of or dependent upon any treaty.”

Not Covered by Agreement. The court explained that a case “grows out of or depends upon” the terms of a treaty or executive agreement when it involves rights “given or protected by” the treaty or executive agreement (148 US 468). Here, the subcontractor’s claim for just compensation did not derive from the executive agreement because the agreement did not “give or protect” any rights the subcontractor held in the dining facility. Since the claim did not “grow out of or depend upon” the executive agreement, the court could determine whether the dining facility was relocatable and thus covered by the agreement, which transferred to the Iraq government “buildings, non-relocatable structures, and assemblies connected to the soil,” but provided “[U.S.] contractors shall retain title to all equipment, materials, supplies, relocatable structures, and other movable property.” The record showed the dining facility was a relocatable, movable structure under the executive agreement. It was a temporary and portable structure that could be assembled and disassembled as needed. The subcontract provided for demobilization and removal, and the Army itself discussed removal of the facility in the months leading up to the Army’s determination. The prime’s procurement manager also testified that the Army had removed and reassembled two similar dining facilities in 2010. Because the facility was a relocatable structure, it was not covered by the executive agreement. The government’s other arguments in support of dismissal also lacked merit. (Kuwait Pearls Catering Co., WLL v. U.S., FedCl, 63 CCF ¶81,765)

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