Agility Public Warehousing Co. v. United States, 969 F.3d 1355

Background

The Coalition Provisional Authority (CPA) awarded Agility a logistics indefinite-delivery/indefinite-quantity contract (PCO contract) in 2004; the contract noted funds were sourced from the Development Fund for Iraq (DFI) and limited U.S. liability after transfer to the Iraqi interim governing authority (IIG).
On June 15, 2004, the IIG designated the U.S. Army as contract administrator for CPA/DFI-funded contracts; the Army administered task orders and paid invoices, some with U.S. appropriated funds and some with DFI funds.
After a DCAA audit, the Army issued final decisions and demand letters alleging approximately $80.8 million in overpayments (U.S. Funds) and later offset $17 million from sums the government owed Agility under a separate U.S. contract (the DDKS contract).
Agility pursued relief at the Armed Services Board of Contract Appeals (dismissed for lack of CDA jurisdiction), in district court (administrative offset challenge, stayed), and at the Court of Federal Claims (two consolidated cases challenging the offset and seeking damages/declaratory relief).
The Court of Federal Claims granted government judgment on the pleadings in one case (holding the government was owed the overpayment and could offset under the Debt Collection Act) and dismissed the other for lack of jurisdiction; the Federal Circuit affirmed the dismissal but vacated and remanded the judgment on the pleadings for further factual and legal review.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Validity of DCA offset (was the U.S. owed the alleged overpayment?)	Agility: Any overpayment under the PCO contract was owed to Iraq because the U.S. acted as Iraq’s agent/contract administrator.	U.S.: To the extent U.S. appropriated funds were used, the U.S. is independently owed erroneously paid appropriated funds and may recover under the DCA.	Held: U.S. may be owed any overpayment of appropriated funds; DCA is a collection mechanism for pre-existing debts, but the Court of Federal Claims must review the merits of the overpayment determination (vacated and remanded).
Judicial estoppel (should U.S. be estopped from claiming the overpayment?)	Agility: U.S. previously argued payments were by Iraq or that it acted only as contract administrator; it should be estopped from now claiming the debt for itself.	U.S.: No inconsistent successful litigation position was adopted; prior proceedings did not accept a contrary position that would trigger estoppel.	Held: No abuse of discretion in refusing to apply judicial estoppel; prior positions did not satisfy estoppel factors.
Breach of covenant of good faith and fair dealing under DDKS (by offsetting)	Agility: Offset denied Agility a forum/ability to recover amounts withheld under DDKS and breached covenant.	U.S.: Offset was lawful under DCA/common law if overpayment existed; procedural and merits challenges remain available.	Held: Claim fails at this stage; remand for merits review of overpayment renders breach claim premature.
Procedural compliance with DCA (did government afford required notices/review?)	Agility: Government letters did not provide required DCA procedural protections (e.g., opportunity to inspect/copy agency records, written repayment agreement).	U.S.: Letters and bills indicated compliance; government later (at oral argument) claimed records were provided.	Held: Court erred in finding as a matter of law that procedures were satisfied; material factual disputes on DCA procedures require remand.

Key Cases Cited

Agility Logistics Servs. Co. KSC v. Mattis, 887 F.3d 1143 (Fed. Cir. 2018) (prior appeal holding the U.S. acted as contract administrator, not a contracting party)
United States v. Wurts, 303 U.S. 414 (U.S. 1938) (government’s right to recover money erroneously paid from the public treasury)
Royal Indem. Co. v. United States, 313 U.S. 289 (U.S. 1941) (Congressional control over disposition of U.S. property/funds)
McCall Stock Farms, Inc. v. United States, 14 F.3d 1562 (Fed. Cir. 1993) (DCA supplements common-law offset rights)
Cecile Indus., Inc. v. Cheney, 995 F.2d 1052 (Fed. Cir. 1993) (DCA provides additional procedures for collection, not replacement of contract law)
Barrett Refining Corp. v. United States, 242 F.3d 1055 (Fed. Cir. 2001) (erroneous or illegal payments implicate constitutional limitations and recovery rights)
Aetna Cas. & Sur. Co. v. United States, 526 F.2d 1127 (Ct. Cl. 1975) (government’s inherent authority to recover illegally or erroneously paid sums)
United States v. Munsey Trust Co., 332 U.S. 234 (U.S. 1947) (judicial review over government offsets to strike balance between debts and credits)
Trustees in Bankr. of N. Am. Rubber Thread Co. v. United States, 593 F.3d 1346 (Fed. Cir. 2010) (judicial estoppel factors and analysis)
Data Gen. Corp. v. Johnson, 78 F.3d 1556 (Fed. Cir. 1996) (standard of review and discretionary nature of judicial estoppel)