The case of Green Valley Company, ASBCA No. 61275, presents an interesting conundrum for contractors facing fraud allegations who also have a contract claim against the government. In 2006, the contractor presented invoices for payment to the government. In 2017, the contractor converted those invoices into a certified claim requesting payment. Under the CDA, the contractor had clearly exceeded the 6-year statute of limitations. However, the contractor requested the ASBCA equitably toll the CDA for what appeared to be sensible grounds. From 2009 until 2016, the contractor had been defending a lawsuit the government filed against it alleging false claims act violations and breach of contract among other causes of action. The government had simultaneously been considering the contractor for debarment, the death penalty of government contracts.
The contractor argued it could not have submitted its claim to the contracting officer while the lawsuit was pending because the government would have alleged the contractor had made yet another false claim thus further potentially exposing the contractor to additional treble damages. The ASBCA rejected the contractor’s argument stating “[n]or does [the contractor] explain why the possibility that the government might respond to its claim with fraud based defenses or causes of action would block it from submitting a claim. The mere fact that such a response from the government might be undesirable to [the contractor] is irrelevant.” Thus, the contractor’s claim was held to be outside the statute of limitations and the appeal was considered time-barred.
The appeal is probably rightly decided because the CDA does not provide a statute of limitations loophole for separate lawsuits between the parties even if the facts are overlapping. Even if equitable tolling were extended for these types of situations, it would be difficult to manage. When would equitable tolling start? When the government alleges fraud in correspondence or when the government accepts a qui tam lawsuit for prosecution or would the mere presence of a qui tam lawsuit be sufficient on its own? When would equitable tolling stop? When the government and contractor sign a settlement agreement or when the case is dismissed from court? The all too frequent allegations of fraud would have the potential to substantially dilute the efficiency of timely resolving claims the CDA.
Furthermore, the Boards of Contract Appeals have methods for handling concurrent litigations. In many cases, the appeal can be stayed pending the outcome of the false claims litigation. Thus, contractors can at least protect their claim – although as discussed below, this may open the contractor to further false claims liability. On the other hand, typically it is the government that moves to stay the appeal because the Board may decide in favor of the contractors claim before the government’s fraud allegations are resolved.
As a practical matter, the ASBCA’s decision creates a difficult risk decision for contractors. It is not infrequent that the government will allege fraud occurred during the course of a contract, whether legitimately alleged or not. It is also not rare for a qui tam suit to be filed alleging fraud on the part of the contractor. If the contractor files a claim with the contracting officer, the potential fraudulent amount in dispute between the government and the contractor may have just become larger exposing the contractor to paying a higher settlement. If the contractor does not file its claim or waits beyond 6 years, it is certainly not going to be able to recover its claim or successfully argue equitable tolling of the statute of limitations.
Unfortunately, there is not a one size fits all answer to this problem. Thus, careful evaluation of the contractor’s individual circumstances is necessary in order to determine the best way forward.