Lumbermens Mutual Casualty Co. v. United States
2011 U.S. App. LEXIS 15903
| Fed. Cir. | 2011Background
- Landmark contracted with the Navy to repair/renovate 160 units for $9,878,026, with completion by Oct 23, 2002 and $75/day liquidated damages for delays.
- Lumbermens issued payment and performance bonds for the original contract, naming the United States as an intended third‑party beneficiary.
- In 2001 the contract was modified to add 21 units for $1,884,174; Lumbermens did not bond these additional units.
- Landmark defaulted in July 2001; the Navy terminated for default on Aug 2, 2001 after substantial progress, with the Navy having paid about 40% of the modified price.
- After default, Lumbermens and Atherton entered a takeover/ Completion arrangement whereby Lumbermens would complete the work and Atherton would complete as subcontractor; a separate completion contract allocated liquidated damages.
- Atherton discovered safety violations; delay extended 46 days; the Navy denied extensions. Atherton completed work on June 6, 2003, triggering liquidated damages assessed against Atherton and recoverable by Lumbermens under a completion agreement.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether equitable subrogation jurisdiction exists | Lumbermens relied on ICW to argue equitable subrogation permits recovery for government overpayments. | Government notes no waiver for pre-default overpayments lacking post-default notice. | Equitable subrogation not jurisdictional for pre-default overpayments. |
| Whether impairment of suretyship/pro tanto discharge is cognizable | Lumbermens seeks affirmative recovery for impairment of suretyship under state law theory. | Sovereign immunity bars such noncontractual claims; not waived by Tucker Act. | No sovereign immunity waiver for impairment of suretyship/pro tanto discharge claims. |
| Whether CDA prerequisites apply to the takeover agreement | Takeover creates post‑takeover claim administrable under CDA, with certified claims. | CDA does not apply because takeover is not a CDA‑covered procurement contract or construction contract with the government. | CDA applies; lack of certified claim deprives Claims Court of jurisdiction; vacated. |
Key Cases Cited
- Insurance Co. of the West v. United States, 243 F.3d 1367 (Fed. Cir. 2001) (equitable subrogation in Tucker Act context)
- Fireman's Fund Ins. Co. v. United States, 909 F.2d 495 (Fed. Cir. 1990) (subrogation and duties of government re contract funds)
- Balboa Ins. Co. v. United States, 775 F.2d 1161 (Fed. Cir. 1985) (equitable subrogation and contract balance)
- U.S. Fid. & Guar. Co. v. United States, 475 F.2d 1377 (Ct. Cl. 1973) (equitable subrogation principles and subrogation rights)
- National Surety Corp. v. United States, 118 F.3d 1542 (Fed. Cir. 1997) (equitable subrogation doctrine and notice timing)
- Blue Fox, Dept. of the Army, 525 U.S. 255 (Sup. Ct. 1999) (sovereign immunity and noncontractual claims; subcontractors cannot recover against Government)
- Hercules Inc. v. United States, 516 U.S. 417 (Sup. Ct. 1996) (implied contracts and Tucker Act scope)
- City of Cincinnati v. United States, 153 F.3d 1375 (Fed. Cir. 1998) (distinguishing implied-in-law from implied-in-fact contracts)
- Winter v. FloorPro, Inc., 570 F.3d 1367 (Fed. Cir. 2009) (CDA jurisdictional de novo review)
- Fireman's Fund Ins. v. Roche, United Pacific Ins. Co. v. Roche (Fed. Cir. 2004) (takeover agreements and CDA privity)