Wednesday, March 21, 2012


In 1920, Justice Oliver Wendell Holmes, Jr. wrote:  "Men must turn square corners when they deal with the Government."  District Judge David M. Lawson of the United States District Court for the Eastern District of Michigan has just tossed out a GSA contractor's suit over GSA's misrepresentations because GSA was immune from suit under the Federal Tort Claims Act (FTCA) and there was no enforceable contract.  Judge Lawson lamented his powerlessness in the circumstances.  But he said:
On the other hand, citizens dealing with the government are charged with knowledge of the limits imposed on governmental employees' authority and the narrow scope of their accountability.  A contractor is well advised not to rely on promises that an agency makes unless they are in the form of an enforceable contract.  Anything less will leave plaintiffs holding the bag, possibly at great expense to themselves.
Plaintiff in this suit sought to recover the considerable expenses it incurred based on a representation made by a GSA employee that GSA intended to exercise an option to purchase the plaintiff's office building complex.  Julie Hoffman sent a letter saying:  "This project will be built.  There is no speculation.  In short, the Project will be a tremendous success story . . . ."  As it turns out, the GSA fumbled the deal when it failed to bind a developer whose participation was required.  The sale fell through and the plaintiff, who could have sued GSA and its employees if they were private actors, fell victim to the doctrine of sovereign immunity.

All of plaintiff's theories of liability were based on the statements made by Julie Hoffman, which proved to be a misrepresentation for which the government is immune, said Judge Lawson.  Case dismissed.

The plaintiff invoked the FTCA as a basis for jurisdiction and waiver of sovereign immunity.  However, there is an explicit exception.  The waiver of sovereign immunity does not apply to any claim arising out of misrepresentation, deceit, or interference with contract rights.  Plaintiffs also  alleged there was a "quasi contract" which, as a matter of law, compelled GSA to do the deal.  Not so, said Judge Lawson.  The Contract Disputes Act (CDA), said he, is not applicable to contracts for real property and in any event any suit for implied in fact contract (not alleged here) belongs in the Court of Federal Claims (COFC). 

Square corners, indeed.  Know the limits on government employees' authority.  Have an enforceable contract.  Don't be left holding the bag.

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