Argument Recap

This month, the Federal Circuit heard oral argument in four cases that attracted amicus briefs. One was Textron Aviation Defense LLC v. United States. In this case, the Federal Circuit is reviewing a judgment of the Court of Federal Claims, which granted the government’s motion to dismiss for failure to state a claim, or in the alternative for summary judgment, in a government contract case. Judges Prost, Clevenger, and Cunningham heard the argument. This is our argument recap.

William R. Peterson argued for Textron. He began by contending the Court of Federal Claims “applied the wrong test to distinguish between nonroutine requests for payment, which can be asserted as claims immediately, and routine requests, which can be asserted as claims only after being disputed by the government.” He argued the correct test is “whether the contractor has been injured by unforeseen or unexpected government activity essentially akin to a breach of contract.” 

A judge indicated the proper test focuses on “intervening unforeseen circumstances or government actions,” and asked how the lower court erred in applying this test here. Peterson responded by arguing “unforeseen circumstances” have to be understood in the context of the case, and here they involved only “billing mistakes.” According to Peterson, “a routine request is looking for money under the contract in accordance with the scheduled course of contractual progression,” while “a nonroutine request is essentially [looking] into a breach of contract.” He later asserted “the whole point of a nonroutine request is that a contractor that has been injured by unexpected or unforeseen action on the government’s part may seek [relief from] immediate injury.” One judge asked what this injury was here. Peterson responded by arguing Textron was injured “when the government breached the contract and refused to pay the request.”

Peterson advocated for a test that would “apply both to the government and to the contractor” to avoid a situation where a claim would be “untimely” just because one party “didn’t provide calculations” earlier. A judge interjected, noting that there are “other reasons” for statutes of limitations, such as staleness. She expressed concern that Textron’t proposed test “has no statute of limitations.” 

Finally, a judge asked why, in this case, Textron could not have calculated the relevant sum and was required to wait for the government. In response, Peterson argued Textron did not offer any evidence on point because it was the government’s affirmative defense, and so the government must establish “as a matter of law, when [Textron] knew or should have known the sum-certain.” He argued that, even if Textron is incorrect about whether the request was routine, it is necessary to reverse the summary judgment. 

Daniel B. Volk argued on behalf of the United States. A judge asked him to first address a letter submission that the government did not respond to. Volk argued the case identified in the letter “contradicts a point that counsel for Textron.” He argued the precedent indicates the statute of limitations begins for the government when the government receives disputed calculations. But, Volk asserted, the same cannot be said for the contractor, not only because the contractor has the relevant information but because “it is their information.” He contended contractors “have a preexisting obligation to do the calculations upon the triggering event.” He argued, moreover, that when the pension plans here were terminated in December of 2012, “Textron was obligated to do the calculations.” One judge interjected, suggesting that, even if the calculations were complex, Textron had six years to complete the calculations. Volk agreed, arguing that the six-year limitation “gives either side plenty of time to decide when to pursue its claim.” 

The court asked how the government would characterize the alleged injury in this case. Volk responded by arguing that, contrary to Textron’s argument, the injury occurs “if the government owes you money, and you don’t have it,” not “when the government refuses to pay you.” One judge asked what would happen if, instead, the contractor owed the government money. Volk argued that, after the government became aware of the contractor’s calculations, the government would have six years to pursue its claim.

Another judge asked if the government disagreed with any part of the lower court’s analysis in this case. Vok answers “yes,” arguing the lower court was incorrect to the extent it concluded that finding the request “routine” would allow Textron to “avoid the statute of limitations.” He asserted that, while the government agreed with the lower court’s judgment, it did not agree that whether the claim is routine should apply to “claim accrual” or the statute of limitation because they are “separate concepts.” 

A judge requested Volk address his policy concerns of Textron’s “ability to wait one hundred years,” which she found “pretty convincing.” Volk explained that, under Textron’s reasoning, there is no statute of limitation, and a contractor may “decide when it wants to get into a dispute.” He argued that if a contractor waits eight years to submit a claim, it is barred by the statute of limitations, which does not provide separate limitations for “complicated claims.” One judge asked if the “real difference” between the parties’ arguments is “the date in which the claim accrues.” Vok agreed. 

Peterson, in rebuttal, argued precedent requires that “routine claims must be in dispute before they can be asserted” and that a dispute by the government “triggers the statute of limitations.” He argued the request here was “looking to see whether the estimates of pension contributions . . . were correct.” Peterson asserted that, when there is a deficit, “it means the amount [the contractor] was charging the government . . . was too low,” and it must request more money. He reiterated his view that Textron’s claim was a routine request for money already owed based on work it already performed. Alternatively, Peterson reiterated, the court should reverse the lower court’s judgment because the government failed to present evidence on when Textron knew or should have known the sum-certain that the government owed it.

We will continue monitoring this case and report on developments.