CBCA: Government Also Bound by Six-Year Statute of Limitations

A contractor has many requirements when submitting a claim against the federal government. But the government must also abide by some of the same rules.

Case in point, a recent Civilian Board of Contractor Appeals case affirms that the government is bound by the same six-year time limit to file a claim against a contractor that a contractor has to file a claim against the government.

The case is JBG/Federal Center, L.L.C. v. GSA, 18-1 B.C.A. ¶ 37019 (2018). To understand how the government became time-barred on its claim against the JBG, a little background is necessary.

The dispute arose out of a lease under which JBG rented out space to GSA to house the Department of Transportation headquarters. The property included the building and a parking garage. As a part of the lease, JBG would provide 145 parking spaces to DOT. DOT was also permitted to use an additional 1060 spaces on the property for its employees, pursuant to a follow-on parking management services agreement (PMSA) between JBG and DOT.

GSA would reimburse JBG for all of the real estate taxes on the property. The lease language provided that GSA would reimburse JBG for real estate taxes “applicable to the Leased Premises.” It also stated that GSA would not reimburse for real estate taxes on any “parking areas or structures, except for the 145 parking spaces directly leased by the Government.”

The fixed-price PMSA contained the Commercial Items clause, FAR 52.212-4, which provides in part that “[t]he contract price includes all applicable Federal, State, and local taxes and duties.”

This full reimbursement of property taxes by GSA to JSB went on for eight years. In 2015, GSA began to withhold a portion of the tax reimbursement because it realized a provision in the lease designated GSA was only responsible for property taxes assessed against the 145 parking spaces in the lease, not the remaining parking spaces DOT used as part of the PMSA.

JBG did not appreciate this change of course, and made a claim. In response, GSA demanded repayment of the excess property taxes for which it had been reimbursing JBG for all those years. In March 2016, JBG submitted a claim to GSA asserting its entitlement to reimbursement of 100% of the real estate taxes and other taxes since the inception of the lease. In September 2016, GSA denied JBG’s claim and demanded $3,506,456.03 from JBG for the overpayment of taxes. JBG then appealed this decision to the CBCA.

In February 2017, JBG submitted a claim to DOT asserting that DOT should pay the amounts demanded by GSA because, if GSA “overpaid for real estate taxes under the lease, JBG is entitled to receive those same amounts under the PMSA because of DOT’s breach of the duty of good faith and fair dealing and superior knowledge in the negotiation of the PMSA.” DOT denied this claim, stating that it was JBG’s error, not DOT’s error, and JBG appealed this denial to the CBCA as well.

CBCA interpreted the lease to mean that “GSA would reimburse JBG for the real estate taxes assessed against the 145 spaces, but not for any other real estate taxes assessed on the parking garage.” CBCA went on to note that “[i]t is the parties’ failure or decision not to include the cost of the real estate taxes in the PMSA price, not the execution of the agreement itself, that limits JBG’s recoupment of these taxes.”

However, important for purposes of this blog post, the CBCA went on to consider JBG’s argument that GSA’s claim for reimbursement is barred by the statute of limitations because it arose in 2007. Under the Contracts Disputes Act (CDA), “[e]ach claim by a contractor against the Federal Government relating to a contract . . . shall be submitted within 6 years after accrual of the claim.” 41 U.S.C. § 7103(a)(4) (2012). These “time limits are equally applicable to claims by the Government against a contractor.”

In order to determine when the six-year period is up, the CBCA will look at the date the claim accrued– that is, “the date when all events that fix the alleged liability on either the Government or the contractor and permit assertion of the claim, were known or should have been known.”

Applying this rule, GSA’s claim accrued in 2007, when it began reimbursing JBG for 100% of the real estate taxes for the property, in spite of the lease provision that property tax reimbursements should only cover the 145 parking spaces mentioned in the lease. CBCA held that GSA knew or should have known it was paying for more than its required share of the real estate taxes at that time, because JBG sent over the property tax bills for the entire property, including the whole parking garage, not just the 145 spaces.

There is one additional wrinkle on the six-year claim limit in this case. GSA did not have just one claim for overpayment of taxes, stretching from 2007 up to when the error was discovered. Rather, each overpayment was a new claim for purposes of the six-year limit, because it was “susceptible to being broken down into a series of independent and distinct events or wrongs, each having its own associated damages.”

The end result of the six-year limitation? GSA could not claim for overpaid amounts before September 2010, but it could claim for amounts after that date, because GSA had first demanded repayment, and thereby made a claim against JSB, in September 2016.

This CBCA decision highlights that the government is sometimes bound by the same rules as any contractor. In particular, the government and contractor must both abide by the same six-year statute of limitations for asserting a claim.