Contract suit against U.S. kept from Court of Claims

A federal judge in Massachusetts has found a rare exception to the rule that contract actions against agencies of the U.S. government fall within the exclusive jurisdiction of the Court of Federal Claims.

On May 14, U.S. District Court Judge Patti B. Saris denied a motion by the government to transfer to the Court of Federal Claims an Ohio marine construction company’s lawsuit alleging the U.S. Army Corps of Engineers wrongfully terminated and breached its contract for dredging Menemsha Harbor in Martha’s Vineyard. The plaintiff filed the complaint in November 2019, claiming more than $3 million in damages.

Pursuant to 28 U.S.C. §1491(a)(1), the CFC generally has exclusive jurisdiction over contract claims against the U.S. in excess of $10,000. Plaintiffs’ attorneys generally prefer to avoid the CFC because of the absence of jury trials and tort remedies.

In moving to transfer plaintiff J-Way Southern, Inc.’s lawsuit from the District of Massachusetts, the government pointed out that since 1857 the CFC and its predecessors have exercised jurisdiction over government dredging contract disputes.

However, the Contract Disputes Act of 1978 preserved admiralty jurisdiction in the federal district courts for suits against the government “arising out of maritime contracts.” Saris pointed out that no court has squarely addressed whether a government dredging contract is a maritime contract within the meaning of the Contract Disputes Act.

In the absence of controlling precedent, Saris looked to the U.S. Supreme Court’s “principal objective” test to determine whether the plaintiff’s contract was a maritime contract. The judge concluded the contract at issue met that U.S. Supreme Court standard.

“The undisputed purpose of the contract was to dredge a navigable waterway and then deposit sand on a beach,” Saris wrote. “Courts have held that dredging a navigable waterway is traditionally a maritime activity and that such a dredging contract facilitates maritime commerce, giving rise to maritime jurisdiction.”

The judge found no merit to the government’s contention that the CFC had exclusive jurisdiction over the case because the principal purpose of the plaintiff’s contract was construction. In this regard, the government emphasized that much of the contract was to be performed by land-borne equipment constructing a temporary onshore pipeline and grading sand on beaches.

“[T]he Government provided no legal support as to why these considerations should outweigh the contract’s plain language and compensation scheme,” Saris wrote. “In this case, the contract provisions demonstrate that the primary purpose of the dredging was to facilitate maritime commerce.”

Given the absence of controlling authority and the fact that the Court of Federal Claims and the Federal Circuit have in the past adjudicated government dredging contract disputes, Saris certified the case for interlocutory appeal of the jurisdictional question to the Federal Circuit.

The 15-page decision is J-Way Southern Inc. v. U.S. The full text of the ruling can be found here.