Last week, the Federal Circuit released its opinion in Textron Aviation Defense LLC v. United States, a government contract case we have been tracking because it attracted an amicus brief. In this case, Textron appealed 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 particular, the Court of Federal Claims dismissed Textron’s claim as time-barred under the Contract Disputes Act. The Federal Circuit, in an opinion authored by Judge Cunningham and joined by Judges Prost and Clevenger, affirmed the lower court’s judgment, holding that Textron’s claim had accrued by early 2013 and was untimely when filed in 2020. This is our opinion summary.
Judge Cunningham began by outlining the procedural and factual background of the case:
This case relates to pension contracts between the federal government and Textron’s predecessor-in-interest, Hawker Beechcraft Defense Company, LLC (‘HBDC’). . . . The contracts at issue are subject to certain Cost Accounting Standards (‘CAS’). . . . The contractual rights and obligations at issue in this appeal arise from the termination and curtailment of CAScovered pension contracts between the federal government and Textron’s predecessor-in-interest, HBDC. In May 2012, HBDC’s parent company and its related entities . . . began formal bankruptcy proceedings. HBDC’s parent company, the Hawker Beechcraft Corporation (‘HBC’), contributed to three employee pension plans . . . that were available to certain employees who performed under the contracts. On December 31, 2012, as part of the bankruptcy proceedings, Beechcraft terminated two of the pension plans and curtailed the third. Beechcraft’s bankruptcy proceedings concluded on February 15, 2013. On March 14, 2014, Textron’s indirect parent, Textron Inc. (‘TI’), acquired Beech Holdings, LLC; this acquisition included the contracts at issue. . . . On April 4, 2018, TI sent a letter to the government requesting pension adjustment costs pursuant to CAS 413 . . . . TI requested $18.9 million under CAS 413-50(c)(12) because of Beechcraft’s pension plan terminations and curtailment. . . . On July 22, 2020, Textron submitted to the government a certified CDA claim for approximately $19.4 million, alleging breach of contract based on the government’s failure to pay the requested pension cost adjustments. On September 8, 2020, the contracting officer denied Textron’s claim, finding the claim time-barred by the statute of limitations at 41 U.S.C. § 7103.
On December 18, 2020, Textron filed a complaint in the Court of Federal Claims, alleging three counts of breach of contract and seeking total damages of approximately $19.4 million in addition to CDA interest. . . . On February 16, 2021, the government moved to dismiss or, alternatively, for summary judgment, arguing that Textron’s claim is barred by the CDA statute of limitations codified at 41 U.S.C. § 7103(a)(4)(A). . . . The Court of Federal Claims granted the government’s motion because it found the statute of limitations precludes Textron’s CDA claim. The trial court determined ‘there simply is no dispute of material fact that Textron . . . knew or should have known all of the information necessary to file a CDA claim at least as early as December 31, 2012, and certainly no later than February 15, 2013,’ . . . when Beechcraft terminated or curtailed the pension plans or when the bankruptcy proceedings concluded, respectively. Textron submitted its certified CDA claim to the contracting officer on July 22, 2020 . . . which the trial court found was ‘well after the six-year CDA claim submission limitations period had run.’ The trial court also concluded Textron’s CAS 413 Submission ‘was a classic nonroutine demand for payment which could have been submitted as a proper CDA claim as early as December 31, 2012, or by February 15, 2013, at the latest.’ Textron timely appealed. We have jurisdiction under 28 U.S.C. § 1295(a)(3).
Before beginning her analysis, Judge Cunningham explained that the Federal Circuit reviews a “grant of summary judgment by the Court of Federal Claims de novo.”
Judge Cunningham continued by outlining Textron’s two contentions on appeal. First, she explained, Textron argued that the lower court erred by finding Textron “knew or should have known the information to assert its claim” before July 22, 2014, the critical date for the statute of limitations. Next, she explained, Textron rejected the lower court’s determination that Textron’s “claim was time-barred” because, according to Textron, it accrued “only when the government refused to pay Textron’s routine request for pension adjustment costs.”
Beginning her analysis, Judge Cunningham highlighted how, under the CDA, “each claim by a contractor against the Federal Government relating to a contract . . . shall be submitted within 6 years after the accrual of the claim.” A claim accrues, she explained, “when all the events, that fix the alleged liability of . . . the Government . . . were known or should have been known.” And, for “liability to be fixed,” some injury must have occurred.
Next, defining what a “claim” is––a request for payment––she distinguished requests between those that are “routine” and “non-routine.” While a routine request requires a “pre-existing dispute” to constitute a claim, she noted that a non-routine request does not. Rather, a non-routine request is “(1) a written demand, (2) seeking, as a matter of right, (3) the payment of money in sum certain.” The critical question at this point, she noted, is “whether the payment request is “a demand for compensation for unforseen or unintended circumstances.”
Before addressing Textron’s contention that its claim was routine, Judge Cunningham addressed whether CAS 413 “contains mandatory pre-claim procedures.” Rejecting Textron’s argument that it does, she reasoned that there were no mandatory pre-claim procedures “that would have delayed the accrual of the statute of limitations” despite Textron’s contention that calculating at-issue sums was “impractical.” Furthermore, Judge Cunningham agreed with the conclusion of the Court of Federal Claims that “Textron knew or should have known the sum certain at summary judgment.” She highlighted that the “relevant events were identified in Textron’s complaint,” and that “[a]ll Textron had to do in order to bring its claim in a timely manner was calculate the sum certain . . . within the six-year period of the statute of limitations.” While Textron pointed out “the complexity of the calculation,” she dismissed its contention as “conclusory” and “insufficient to preclude summary judgment.”
Judge Cunningham returned to Textron’s arguments regarding whether its April 2018 payment request was “routine.” If it was routine, Textron argued, it “could not accrue and start the six-year statute of limitations clock” until the government disputed the request “and thus injured Textron by refusing to pay.” First, she reasoned, “Textron’s CAS 413 request for payment was non-routine” because “the alleged amount owed to Textron . . . ha[d] no connection whatsoever to the ‘expected or scheduled progression of contract performance.'” Rather, she noted, it arose from “unanticipated bankruptcy and associated segment closings.” Moreover, she reiterated, “a non-routine request does not need to be disputed to constitute a CDA claim.” Second, she agreed with the trial court’s analysis that “Textron was injured for purposes of claim accrual by at least February 15, 2013.” Rejecting Textron’s argument that the earliest injury occurred in 2020, Judge Cunningham pointed to Textron’s predecessor-in-interest, who “sustained damage when the terminations and curtailment of the pension plans triggered its ability to request CAS 413” cost adjustments on December 31, 2012 or at the latest February 15, 2013 “when bankruptcy proceedings concluded.” At that point, she explained, “the government’s obligation to pay was fixed; all the events that gave rise to Textron’s right to payment from the government had occurred.”
Concluding her analysis, Judge Cunningham noted the “practical implications of ruling in Textron’s favor.” Adopting its understanding––that a claim does not accrue “until the contractor submitted a request for payment and the government then disputed that request”––”would effectively allow [Textron] to control when the statute of limitations period began to run, which is impermissible,” she explained.
As a result of her analysis, the Federal Circuit affirmed the grant of summary judgment by the Court of Federal Claims. The Federal Circuit did not reach the lower court’s alternative reasoning, since any error would have been harmless.