ASBCA Appeals Proceed Despite Parallel False Claims Act Case

The Armed Services Board of Contract Appeal’s (ASBCA) decision in BAE Systems Tactical Vehicle Systems LP, ASBCA Nos. 59491, 60433 (July 25, 2016), denying the government’s motion to stay appeals due to a parallel False Claims Act (FCA) case in federal district court is an important reminder that the agency boards of contract appeals do not have jurisdiction over fraud.  The decision underlines the CDA jurisdictional mandate and required statutory government contracts expertise of board judges to decide federal contractor claims, and the right of the contractor to have such claims decided by the board even when a fraud case is pending in federal court. Therefore, determination of a Contract Disputes Act (CDA) claim due to alleged defective pricing under the Truth in Negotiations Act (TINA) may proceed to a decision even if there is a district court FCA case concerning the same defective pricing allegation.  This decision also highlights the benefit to a contractor of electing the agency boards over the Court of Federal Claims (COFC), as the government cannot assert a fraud counterclaim as may be done in a CDA claim action at the COFC.

The appeals concern a $56M CDA government claim that BAE provided defective cost or pricing data in connection with award of the Army’s Family of Medium Tactical Vehicles and BAE’s CDA TINA offset claim of $65M.  The government moved to stay the appeals due to a civil defective pricing FCA case in federal district court.  The ASBCA denied the motion to stay and lifted a temporary stay.

Four Factors Considered In Parallel Proceedings

In denying the motion the ASBCA considered four factors: (1) whether the facts, issues, and witnesses in both proceedings were substantially similar; (2) whether the on-going investigation or litigation would be compromised by going forward with the appeal; (3) the extent to which the proposed stay could harm the non-moving party; and (4) whether the duration of the requested stay is reasonable.

Similarity and Impact on District Court FCA litigation

The government submitted letters to the ASBCA from the U.S. Attorney’s office handling the FCA case in district court and the director of the Fraud Section of DOJ’s Commercial Litigation Branch.  The letters argued the ASBCA proceedings interfered with the prosecution of the FCA case and the parallel proceeding could result in conflicting decisions. The government argued it would experience substantial prejudice if the ASBCA case proceeded because the ASBCA cannot make findings of fraud. The government argued the district court was the more efficient forum to adjudicate all of the issues, specifically the facts concerning whether BAE knowingly provided a false certification and therefore would be liable for double damages as well as forfeiture of its offsets.

The ASBCA found similarity of facts, issues, and witnesses argued against a stay, noting the threshold issue in both cases was whether BAE failed to disclose current, accurate, and complete cost or pricing data, and that this is a foundational issue within the ASBCA’s subject matter expertise. BAE noted the government had not identified a single fact that it would be unable to use in the ASBCA proceeding warranting a stay. BAE argued its statutory right under the CDA to have its appeal decided by the ASCBA, and that because the dispute stems from events that happened up to eight years ago, witnesses were already having difficulty recalling events and the government was having difficulty locating and producing documents.  BAE pointed out discovery had not started in the FCA case and no trial date had been set, while discovery was underway at the ASBCA with a hearing scheduled for January 2017.

In denying the motion, the ASBCA recognized that under the CDA a contractor is entitled to have a properly asserted appeal litigated before, and decided, by the ASBCA. The ASBCA found that while there are overlapping facts relevant to both cases, they are sufficiently distinct that a stay is not warranted. Importantly, the ASBCA found the differences stemmed from fraud and false statements not before the ASBCA, as well as whether any defective pricing occurred knowingly.

Harm to BAE and Duration of the Stay

Concerning harm, the ASBCA did not find the government had demonstrated a clear case of hardship or inequity in being required to go forward. The government had only speculated that the ASBCA and the court could reach inconsistent findings, or that witnesses may have to be deposed twice, neither of which the ASBCA found compelling. The ASBCA agreed with BAE that it could be prejudiced by the further passage of time, due to the potential loss of witnesses and evidence. Because the government had not represented that the stay will be of any duration other than indefinite, the ASBCA found BAE could be harmed by a further delay.

Finally, the ASBCA concluded judicial efficiency would be best served by proceeding with the appeals, because the ASBCA litigation is likely to lead to an earlier resolution of the contract claims.

Lack of ASBCA Fraud Jurisdiction an Advantage to Contractors

The decision denying the stay reminds contractors the ASBCA does not have jurisdiction over fraud, and the advantages of this limited jurisdiction.  An appeal may therefore proceed to a decision even if there is a district court civil False Claims Act case on the same contract.  The decision highlights the benefit to a contractor of electing the ASBCA over the COFC, since the government cannot assert a fraud counterclaim as may be done at the COFC.  ASBCA judges by statute must have at least five years of government contract law experience which underlines the CDA jurisdictional mandate requiring the statutory expertise of the ASBCA to decide federal contractor claims.  District court judges have no such expertise requirement.

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