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Contractor Loses Retaliation Appeal Against Corps of Engineers

By Robyn Hagan Cain on March 19, 2013 | Last updated on March 21, 2019

MES, Inc claims that the U.S. Army Corps of Engineers unfairly terminated three of its construction/renovation contracts in retaliation for MES’s criticism of the Corps’ mismanagement of construction projects. After an administrative challenge, MES brought a Bivens action in federal court.

The district court dismissed their claim, finding that it was precluded by the Contract Disputes Act (CDA).

The Second Circuit Court of Appeals, in a matter of first impression, affirmed that decision. The ruling brings the Second Circuit in line with the Seventh and Ninth Circuits, as well as the district courts that have considered the issue.

MES is a New York corporation that specializes in building complex structures such as laboratories, weapons testing facilities, and warehouses for munitions and explosives. Since 1992, it has performed construction work for the Army Corps of Engineers. Between September 19, 2003, and September 29, 2006, the Corps awarded MES three contracts for work to be performed at the Picatinny Arsenal in Dover, New Jersey.

It is undisputed that the Arsenal contracts weren't performed according to the Corps' specifications. Thus, between March and December 2008, the Corps provided MES with written notice that it was terminating each of the contracts for default.

MES challenged the contract terminations before the Armed Services Board of Contract Appeals (ABSCA), claiming that the Corps was responsible for the delays due to specifications defects and demands for additional unfunded work beyond the original agreements. ABSCA dismissed the claims, so MES sued both the Corps and individual Corps officials. The company alleged that the defendants unlawfully retaliated against MES because its president, George Makhoul, complained that the Corps had violated the Anti-Deficiency Act in demanding that MES perform additional unfunded work.

All of the courts seem to agree that the CDA offers a comprehensive scheme for securing relief from the U.S. for any disputes pertaining to federal contracts. The existence of that statutory scheme precludes MES from pursuing Bivens claims against federal employees in their individual capacities for alleged due process or First Amendment violations.

If you have a client who is peeved about a canceled federal contract, the CDA is your only route to recovery.

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