Sys. Application & Tech., Inc. v. United States, 26 F. 4th 163 (4th Cir. Feb. 14, 2022)
In 2015, Systems Application and Technologies, Inc.’s (“SA-TECH”) employees sued it in California state court for violating California’s labor laws. SA-TECH is a U.S. Navy services contractor that provides the Navy with training and weapons testing primarily at Naval bases in California and on Naval vessels in the Pacific. SA-Tech’s employees often perform work on the Naval ships at sea and spend more than 24 hours at a time on the Naval ships, but SA-TECH does not pay its employees for overtime spent on the ships when the employees are not working. SA-TECH’s employees sued it claiming that it violated California wage laws by failing to pay them for the entire time they were required to stay on the ships, which was often 24 hours or more.
In 2017, SA-TECH sought guidance from the Navy regarding whether California’s labor laws applied to its employees under its contract with the Navy. SA-TECH received no response from the Navy and filed a claim under the Contract Disputes Act (“CDA”), but the contracting officer denied the claim. Subsequently, SA-TECH filed a complaint in a U.S. District Court in Maryland seeking declaratory judgment and injunctive relief. The District Court dismissed SA-TECH’s complaint for lack of subject matter jurisdiction because SA-TECH failed to fulfill the CDA’s exhaustion requirements. Specifically, SA-TECH’s claim for agency was not asserted as a matter of right as required under the CDA and SA-TECH’s monetary claims failed to include a “sum certain,” which is required under the CDA. SA-TECH appealed.
The Fourth Circuit affirmed the District Court. When the CDA applies, it provides the exclusive mechanism for dispute resolution. An aggrieved contractor who wishes to pursue relief under the CDA must first present a valid, written claim to the agency’s contracting office, who will issue a written decision. If the officer denies the claim, the contractor may either appeal to the governing agency board or bring an action in the Court of Federal Claims. For claims arising under maritime contracts, however, the contractor may appeal the contracting officer’s decision instead to a federal district court. Before bringing an action in district court, the contractor must exhaust its lower-level administrative remedies. To exhaust its administrative remedies, an aggrieved contractor must present to the contracting officer a valid claim that relates to the contract. A “claim” is a written demand or written assertion by one of the contracting parties seeking, as a matter of right, the payment of money in a sum certain, the adjustment or interpretation of contract terms, or other relief arising under or relating to the contract. For all claims, the contractor must be seeking some relief as a matter of right, which requires that the contractor specifically assert entitlement to the relief sought (i.e. a demand for something due or believed to be due). Failure to include a “sum certain” in a monetary request renders the submission not a “claim” under the CDA and is fatal to jurisdiction under the CDA. SA TECH either failed to assert that it was contractually entitled “as a matter of right” to the Navy’s opinion on its agency status or failed to include a “sum certain.”
