In Metcalf
Construction Co., Inc. v. United States, 2014 WL 51956 (Fed. Cir. 2014),
the U.S. Court of Appeals for the Federal Circuit considered the scope of the
federal government’s duty of good faith and fair dealing to a private contractor
engaged to design and build military housing.
The case involved claims by the contractor against the government for
differing site conditions and associated delays and the government’s assessment
of liquidated damages against the contractor.
In addition to claiming the government’s material breach of specific
contract provisions, the contractor claimed that the government’s actions
breached the government’s implied duty of good faith and fair dealing under the
contract.
Interpreting the Federal Circuit’s prior decision in Precision Pine & Timber, Inc. v. United
States, 596 F.3d 817 (Fed. Cir. 2010), the trial court had held that a
breach of the government’s duty of good faith and fair dealing could only be
established by a showing that the government “specifically designed to
reappropriate the benefits [that] the other party expected to obtain from the
transaction, thereby abrogating the government’s obligations under the
contract” -
in short, “specific targeted action” against the contractor, regardless of any
incompetence and/or failure to cooperate or accommodate a contractor’s requests. The Federal Circuit, however, held that the
trial court’s view of its Precision Pine decision
was “unduly narrow” and that the trial court had misread the decision. The Court clarified that its prior decision
in Precision Pine did not purport to
define the scope of good faith and fair dealing claims for all cases, let alone
alter prior standards, and that the Precision
Pine decision did not hold that the absence of specific targeting, by
itself, would defeat a claim of breach of the implied duty. Instead, the Court stated that the “specific
targeting” language of the Precision Pine
decision on which the trial court relied only meant that the implied duty
of good faith and fair dealing depends on the parties’ bargain in the
particular contract at issue.
Accordingly, the Metcalf
decision clarifies that the government’s duties of good faith and fair
dealing should be analyzed on a case-by-case basis and in the context of the
contract -
particularly, according to whether the government’s actions rise to the level
of denying the contractor its benefits of the parties’ bargain in the contract.
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