Call Henry, Inc. v. United States
855 F.3d 1348
Fed. Cir.2017Background
- Call Henry contracted with NASA in 2003 to provide SCA-covered service work under a multi-year, fixed-price contract with option years; FAR clause 52.222-41 (Service Contract Act provisions) was incorporated.
- Successor-contract rules under the SCA made predecessor collective-bargaining agreement (Teamsters) wage/fringe terms the applicable wage determination for option periods once NASA exercised options.
- Call Henry negotiated collective bargaining agreements requiring contributions to the Teamsters’ multi-employer pension plan, which later entered critical status and required increased employer contributions.
- After the Teamsters were decertified in 2012, Call Henry was deemed to have withdrawn from the multi-employer plan and assessed MPPAA withdrawal liability (reduced by arbitration from ~$6M to <$2M); Call Henry sought contract price adjustment under FAR 52.222-43 (SCA Price Adjustment Clause).
- NASA denied the claim; the Court of Federal Claims dismissed Call Henry’s breach-of-contract suit, holding (1) the NASA contract incorporated only SCA economic provisions and did not require Call Henry to join the pension plan, and (2) MPPAA withdrawal liability is not an SCA "fringe benefit" covered by the SCA price-adjustment clause. The Federal Circuit affirms.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether MPPAA withdrawal liability is a "fringe benefit" under the SCA | Withdrawal liability represents the lump-sum value of accrued pension benefits and thus is a fringe-benefit cost covered by the SCA | Withdrawal liability arises from the MPPAA (a separate federal statute) and is not an SCA "fringe benefit" | Court: not dispositive to decide; even if it were a fringe benefit, Call Henry still loses |
| Whether FAR 52.222-43(d) (SCA Price Adjustment Clause) requires upward price adjustment for MPPAA withdrawal liability | Price adjustment should cover increased costs of complying with wage determinations, including withdrawal liability incurred to provide required pension benefits | Price-adjustment clause only covers increased costs to comply with a wage determination applied to the contract; Call Henry’s withdrawal liability was a risk it voluntarily assumed when it joined the multi-employer plan and is not a cost of complying with a wage determination applied to the NASA contract | Held: No. MPPAA withdrawal liability is not an increased cost of complying with the wage determination applied to the NASA contract, so no contract-based price adjustment |
| Whether Lear Siegler controls entitlement to adjustment here | Lear establishes that increased employer cost to provide mandated benefits can trigger FAR 52.222-43(d) | Lear is distinguishable because in Lear the contractor remained contractually obligated to make increased contributions to provide defined benefits; here NASA did not require Call Henry to join the pension plan or assume MPPAA risk | Held: Lear is distinguishable; Call Henry assumed withdrawal-risk independently, so Lear does not entitle adjustment |
| Whether the government assumed the risk of Call Henry’s withdrawal liability | Call Henry argues the SCA scheme and price-adjustment clause allocate such cost to the government | Government argues the contract did not require Call Henry to join the pension plan and thus did not allocate withdrawal risk to the government | Held: Government did not assume MPPAA withdrawal risk; COFC and Federal Circuit reject Call Henry’s claim |
Key Cases Cited
- Lear Siegler Servs., Inc. v. Rumsfeld, 457 F.3d 1262 (Fed. Cir. 2006) (price-adjustment clause triggered by increased cost of compliance with wage determinations)
- Bell/Heery v. United States, 739 F.3d 1324 (Fed. Cir. 2014) (motion-to-dismiss pleading standard and contract-claim elements)
- Connolly v. Pension Benefit Guar. Corp., 475 U.S. 211 (U.S. 1986) (MPPAA withdrawal liability described as allocable share of unfunded vested benefits)
- G.L. Christian & Assocs. v. United States, 312 F.2d 418 (Ct. Cl. 1963) (Christian doctrine: mandatory contract clauses incorporated by law)
- General Eng’g & Mach. Works v. O’Keefe, 991 F.2d 775 (Fed. Cir. 1993) (application of the Christian doctrine in government contracts)