Contractor Permitted to Add Related Claims to Claim Already Before the Court of Federal Claims

September 22, 2015

In K-Con Building Systems, Inc., v. United States, No. 2014-5062 (Fed. Cir. 2015), the Federal Circuit explained what constitutes a separate and distinct claim for jurisdiction purposes, providing guidance to federal contractors seeking to amend complaints in the Court of Federal Claims (“COFC”) in order to add later related claims.

K-Con entered into a contract with the federal government to construct a building for the Coast Guard.  Once complete, the government imposed liquidated damages for delay in completion.  K-Con then requested remission of the liquidated damages in a letter to the contracting officer (“CO”) on the grounds that the liquidated damages constituted an impermissible penalty and the government failed to issue extensions to the completion date as a result of changes to the contract. The CO denied this request. K-Con then sued in the COFC under the Contract Disputes Act (“CDA”).  While litigation was underway, K-Con submitted a second letter to the CO, seeking additional compensation for extra work performed in response to the government’s changes. The CO also denied this request.  K-Con then amended its complaint in the COFC to add the allegations included in the second letter.

K-Con’s amended complaint sought two forms of relief.  First, it requested remission of the liquidated damages clause on two grounds – that the clause was unenforceable and that K-Con was entitled to an extension of the completion date. Second, K-Con requested additional compensation based on work performed in response to government requests that K-Con alleged amounted to contract changes. The COFC ruled against K-Con on all three claims on summary judgment.

On appeal, the government argued that there was no authorized final decision on K-Con’s changes claim before litigation on it commenced because K-Con sent its second letter to the CO after filing its original complaint.  And so, the government argued, the CO’s final decision was invalid and could not serve as a basis for appeal because once a claim is in litigation, the CO may not rule on it even if the claim is not properly in litigation. While the Court agreed with this general rule, the Court disagreed with the government’s analysis.  First, the Court explained that pending litigation divests COs of authority only as to the claims at issue in the pending litigation, not all potentially related claims – its jurisdiction is limited to individual claims, not entire cases. Accordingly, identifying what constitutes a separate claim is important.  The Court explained that it should treat requests as involving separate claims if they either request different remedies or assert grounds that are materially different from each other factually or legally.  The Court held that K-Con’s contract-changes claim was separate from the liquidated damages claim in the original complaint because the remedy requested in the second letter was categorically different: the original complaint asked for remission of liquidated damages, whereas the second letter asked for compensation for extra work performed. Consequently, the CO’s rejection of the second letter was an authorized final decision sufficient to establish jurisdiction.

K-Con is an important decision because it holds that even though litigation is pending at the COFC, a federal contractor is not precluded from adding related claims to its complaint. But federal contractors must remember to present a separate and distinct claim – different remedy or ground for relief– to a CO before seeking to amend their complaint. If a separate and distinct claim is presented to the CO, even after litigation has commenced on a related claim, the CO’s decision will be an authorized final decision sufficient to establish jurisdiction in the COFC.