September 23, 2019

September 23, 2019

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September 20, 2019

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Left Holding the Bag: Release Provision Precludes Recovery for Costs Incurred Post-Release

Over the last year, we have reported extensively on various government contract decisions regarding contract releases. In Sylvan B. Orr v. Department of Agriculture, CBCA 5299 (Sep. 29, 2017), the Civilian Board of Contract Appeals (“CBCA” or “Board”) published yet another notable opinion on this topic. This decision demonstrates why it is critical to reserve your rights regarding potential claims sparked by conduct that occurs before a release of claims provision is signed—even when the additional costs at issue are not incurred until after the release is executed.

Contractor Performs, Signs Invoice with Broad Release Provision

In April 2013, the United States Forest Service (“Forest Service” or “agency”) awarded Mr. Orr an incident blanket purchase agreement (“I-BPA”) for the supply of weed washing equipment and associated services for use during fire suppression and all-hazard incidents. In 2015, the Forest Service placed task order E-60 under Mr. Orr’s I-BPA for a weed washing unit for the Bobcat fire outside Salmon, Idaho. Mr. Orr accepted the order, and completed the assignment five days later. As part of the overall effort to wrap-up activities at the Bobcat fire site, a Forest Service representative determined that solid waste was left at the site inside a black plastic bag. When that representative was unable to complete the Orr task order close-out, such duties were handed over to Mr. Larry Sinclair, a Forest Service manager.

Mr. Orr averred that Mr. Sinclair directed Mr. Orr to take the solid waste to the Forest Service Supervisor’s Office that was nearby (the “Salmon Office”). Mr. Sinclair vehemently denied providing such direction. In any event, “[w]hatever the direction (or lack thereof) for solid waste disposal was, . . . Mr. Orr’s employees loaded the solid waste into the back of Mr. Orr’s . . . truck, and Mr. Orr departed the incident site in this truck.” Op. at 8.

The next day, Mr. Orr sought to close out the task order. The Forest Service receiving officer (Mr. Thomas R. Geiser) prepared a draft invoice indicating that Mr. Orr had performed under the order and was entitled to payment at daily rates totaling $5,860. The invoice contained the following release language:

Contract Release For And In Consideration Of Receipt Of Payment In The Amount Shown On “Net Amount Due” Line 28 [$5,860]. Contractor Hereby Releases The Government From Any And All Claims Arising Under This Agreement Except as Reserved In “Remarks” Block 22.

Block 22 of the invoice included the word “Final,” and Mr. Geiser handwrote the words “No Damage No Claims.” Mr. Orr signed the invoice without mentioning that there was an outstanding issue about his disposal of the solid waste.

Contractor Submits Claim Post-Release, Appeals CO’s Final Decision

Approximately a month after completing all work at the Bobcat site, Mr. Orr submitted a claim to the contracting officer seeking compensation for events that allegedly occurred before and after signing the release of claims. Specifically, regarding the post-release conduct at issue in the Board’s September 29, 2017 opinion, Mr. Orr sought $8,790 arising from his attempts to deliver the solid waste after he signed the invoice and until the Forest Service finally accepted it. The contracting officer ultimately denied the claim finding that it was barred by the release provision contained in the executed invoice, and Mr. Orr appealed to the Board.

The Board Issues Its First Decision, Does Not Decide Claim for Post-Release Work

On October 18, 2016, the Board dismissed virtually all of Mr. Orr’s appeal. Sylvan B. Orr, 16-1 BCA ¶ 36,522. With regard to the portion of Mr. Orr’s claims for work that preceded his execution of a release, the Board held that “a contractor who executes a general release is thereafter barred from maintaining a suit for damages or for additional compensation under the contract based upon events that occurred prior to the execution of the release.” Id. (quoting B.D. Click Co. v. United States, 614 F.2d 748, 756 (Ct. Cl. 1980)). To so conclude, the Board recognized that, “‘[i]f parties intend to leave some things open and unsettled, their intention to do so should be made manifest’ in the release itself.” Id. (quoting United States v. William Cramp & Sons Ship & Engine Building Co., 206 U.S. 118, 128 (1907)).

The Board reached a different conclusion regarding Mr. Orr’s request for compensation for post-performance delays in solid waste disposal. The Board noted that “[a]bsent special circumstances, a general release only serves to preclude those claims ‘based upon events which occurred prior to the execution of the release.’” Id.(quoting H.L.C. & Assocs. Constr. Co. v. United States, 367 F.2d 586, 590 (Ct. Cl. 1966) (emphasis added)). And based upon the record currently before the Board, the Forest Service had not established that the release necessarily precluded relief for these post-release costs. Id.

Subsequent Decision Finds Claim for Post-Release Costs was Released

Based on an extensively supplemented record, the Board issued a second decisionultimately denying Mr. Orr’s solid waste disposal claim for costs incurred post-release because “Mr. Orr failed to preserve his claim for solid waste disposal problems by signing the release without mentioning those problems.” Op. at 13. The Board explained that when Mr. Orr signed the invoice with the broad release, Mr. Orr did not “mention[] that the [Forest Service] had not given him valid instructions for disposing of the solid waste captured during [task] order performance.” Id. at. 2. In fact, “[a] whole day went by after Mr. Orr allegedly received his disposal direction before he signed the release, and he mentioned nothing about solid waste when signing the release.” Id. at 12. Ultimately “the allegedly defective direction,” which resulted in additional costs being incurred, “preceded the release” and any rights stemming therefrom were waived when the release was signed. Id. at 13.

Key Takeaway

This decision emphasizes the importance of assessing all outstanding performance issues and diligently and expressly reserving rights regarding potential claims arising from such performance issues prior to signing any document containing a release of claims. This practice should mitigate a contractor’s risk of being left holding the bag without recovery.

© 2019 Covington & Burling LLP

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About this Author

Brian Byrd, Covington Burling Law Firm, Government Contracting Attorney
Associate

Bryan Byrd has experience advising clients across a broad range of issues arising from their participation in government contracting.

Mr. Byrd’s practice covers multiple subject-matter areas, including: contract negotiations, bid protests, flow-down requirements, schedule contracts, compliance, and performance disputes. He works with clients in many industries, including life sciences, defense, and construction.

202-662-5704
Justin Ganderson, government contracts lawyer, Covington
Special Counsel

Justin Ganderson is Special Counsel in the firm’s Washington, DC office and a member of the Government Contracts Practice Group. Mr. Ganderson focuses his practice in the areas of claims and disputes resolution, internal investigations, public and private partnerships, utility privatizations, and general federal government contract counseling.

Mr. Ganderson has extensive experience in preparing and crafting requests for equitable adjustments and Contract Disputes Act (CDA) claims, and resolving disputes with government agencies prior to the commencement of litigation.

202.662.5422