ASBCA Finds that Army Breached Software License Agreement
On June 27, 2018, in the appeal of CiyaSoft Corporation, ASBCA Nos. 59519, 59913 the Armed Services Board of Contract Appeals ("ASBCA") held that the Army violated a software license agreement, which limited use to one user per license. The Army argued that it never agreed to the terms of the software license. The Army's sole source contract to CiyaSoft Corporation did not include such a restriction. The Board found, however, that the Army had implicitly agreed to the software license when it broke the seal on the software package. The software package stated that "by breaking the seal, you accept the terms of the license agreement." The Board noted that the Army never requested an opportunity to review the license agreement prior to awarding the sole source contract and did not object to the license upon its receipt.
The ASBCA held that the Army violated the license agreement by allowing more than one user per license. In so holding, the Board stated that "it is the policy of the government, when licensing commercial software to accept the licensing terms customarily provided by the vendor to other purchasers, as long as the license agreement is consistent with federal law and otherwise satisfies the government's needs." The Board also noted that "the law generally does not permit a party to avoid the terms of a contract on the ground that he or she failed to read it."
This case sends a clear message to the Government that it too is subject to commercial software license agreements and cannot avoid them by claiming ignorance.
Board Allows Contractor to Pursue New Legal Theory Against a Termination for Default
On June 6, 2018, the Civilian Board of Contract Appeals ("Board") denied the VA's motion to strike certain counts of a contractor's complaint challenging a termination for default. The contractor had previously filed a Contract Disputes Act claim alleging that the VA acted in bad faith, delayed and prevented contract performance and repudiated the contract. The contractor appealed the contracting officer's final decision denying its claim. The contractor then filed a complaint at the Board of Contract Appeals, asserting among other things, that the VA breached its duty of good faith and fair dealing by failing to give the contractor a fair opportunity to compete for additional work. The VA moved to dismiss the contractor's claim based on the violation of the duty of good faith and fair dealing because this legal theory was not included in the contractor's CDA claim.
The Board set forth the following standard of review to resolve this dispute:
The Board may not consider new claims a contractor failed to present to the contracting officer. Lee’s Ford Dock, Inc. v. Secretary of the Army, 865 F.3d 1361, 1369 (Fed. Cir. 2017) (citing Santa Fe Engineers, Inc. v. United States, 818 F.2d 856, 858 (Fed. Cir. 1987)). “A claim is new when it ‘present[s] a materially different factual or legal theory’ of relief.” Id. (quoting K-Con Building Systems, Inc. v. United States, 778 F.3d CBCA 5907 3 1000, 1006 (Fed. Cir. 2015)). A claim before the Board is not required to rigidly adhere “to the exact language or structure of the original administrative CDA claim” presented to the contracting officer. Scott Timber Co. v. United States, 333 F.3d 1358, 1365 (Fed. Cir. 2003). It is enough that the claim to the contracting officer and the claim before the Board “arise from the same operative facts, claim essentially the same relief, and merely assert differing legal theories for that recovery.” Id. “Materially different claims ‘will necessitate a focus on a different or unrelated set of operative facts.’” Lee’s Ford, 865 F.3d at 1369 (quoting Placeway Construction Corp. v. United States, 920 F.2d 903, 907 (Fed. Cir. 1990)).
Applying the above rule of law, the Board denied the VA's motion to strike and found that the claim based on breach of the duty of good faith and fair dealing arises from the same operative facts as the breach of contract claim. The Board also noted that the contractor is seeking the same monetary damages as in the CDA claim. The Board therefore found that it had jurisdiction.
Walker Development & Trading Group, Inc. v. Department of Veterans Affairs, CBCA 5907 (June 6, 2018)
