In a recent decision, the Court of Federal Claims held that the Government was liable to a contractor for $195,889.78 in legal fees incurred in defending against a qui tam action filed against the contractor. The Tolliver Group, Inc. v United States, No. 17-1763C (Fed. Cl. July 14, 2020). The contractor took over a fixed-price level-of-effort task order with the Army for the production of a series of technical manuals for the Army’s mine clearing vehicle. The task order required the Army to provide certain government-furnished information to the contractor, including a technical data package with engineering drawings. The Army never provided the technical data package but nevertheless directed the work to proceed. Eventually, the contracting officer issued a contract modification that removed the Government’s obligation to provide the technical data package. As part of the modification, the task order was converted to firm fixed-price.
A qui tam plaintiff filed suit against the contractor, alleging that the contractor violated the False Claims Act while performing the task order during the period before the modification became effective. The plaintiff alleged that the contractor falsely certified compliance with the technical data package despite never having received the package. The Government declined to intervene or to move to dismiss the qui tam action. However, the action ultimately was dismissed.
After the qui tam action was dismissed, the contractor submitted a claim for an equitable adjustment seeking to recover its allowable legal fees incurred in defending the action. The contracting officer denied the claim, concluding that the firm, fixed-price task order did not contain a provision whereby the Government assumed the risk of legal costs. The contractor filed an appeal with the Court of Federal Claims, which held that the contractor was entitled to an equitable adjustment. The Tolliver Group, Inc. v. United States, 146 Fed. Cl. 475 (2020).
The Court held that, under the Spearin doctrine, when the Government provides a contractor with defective, erroneous, or promised but missing specifications, the Government is deemed to have breached the implied warranty that satisfactory contract performance will result from adherence to the specifications, and the contractor is entitled to recover costs proximately flowing from the breach. In this case, the Court concluded that the Government breached this implied warranty by failing to provide the technical data package. According to the Court, it was the Army’s actions that resulted in the qui tam action being filed and the contractor incurring the legal costs defending against the action. The Court ordered the Government to file any objections regarding the reasonableness of the contractor’s costs.
The Government subsequently challenged the contractor’s entitlement but failed to provide any detailed objections to the attorneys’ billing rates or total sum claimed. As a result, the Court issued a judgment in the contractor’s favor for the full amount claimed.
This case provides an interesting theory of recovering legal fees incurred in defending against a qui tam action when the action was brought, at least in part, by the Government’s actions. It will be interesting to see whether other contractors will have similar success in the future.