East Coast Repair & Fabrication, LLC v. United States, 16 F. 4th 87 (4th Cir. Oct. 1, 2021)
The United States Navy (“Government”) contracted with East Coast Repair & Fabrication, LLC (“East Coast”) to repair three ships: (1) USS Thunderbolt; (2) USS Tempest; and (3) USS Hurricane. In 2013, the Government claimed it was entitled to $474,600 in liquidated damages because East Coast delivered the Tempest late. Because the Government paid East Coast all but $1,000 for its work on the Tempest, the Government withheld a $473,600 setoff from payment to East Coast under the Hurricane contract. East Coast claimed the Government caused the Tempest delays, disputed the assessment of liquidated damages, and sought additional compensation for unanticipated work on the Tempest, which the contracting officer denied. East Coast sued the Government under the Tempest contract and included the $473,600 setoff in its lawsuit. In 2017, East Coast and the Government settled the Tempest lawsuit and the settlement included broad, but not identical, releases of liability by each party. The Tempest lawsuit was dismissed with prejudice. In 2020, East Coast filed this action, claiming the Government’s refusal to pay the $473,600 was a breach of the Hurricane contract. The district court granted the Government’s motion for summary judgment, holding, in part, that the Tempest settlement agreement barred East Coast’s claims. East Coast appealed.
The Court affirmed the district court’s judgment because the parties’ settlement agreement precluded East Coast’s claims. Res judicata bars a party from asserting a claim in a later suit once a court has reached a final judgment on the merits of the same claim in an earlier suit. If a claim is resolved in a settlement agreement, the court looks to the intent of the parties to determine whether the settlement agreement bars later claims. Contract interpretation is used to discern the parties’ intent. Here, East Coast released the Government from liability for any and all claims arising out of or in any way relating to the Tempest contract. The $473,600 related to the Tempest contract because it was withheld as liquidated damages on the Tempest Contract, which is what East Coast alleged in its Tempest lawsuit.
