Pillsbury Winthrop Shaw Pittman

Who says life’s not fair: good faith and fair dealing prevails in Metcalf case

By C Joël Van Over and Alexander B Ginsberg

In a ruling highly anticipated among government contractors, the US Court of Appeals for the Federal Circuit held on 11 February 2014, in Metcalf Construction Company Inc v United States, No. 2013-5041 (Fed. Cir. Feb. 11, 2014), that a contractor suing the government for breaching the implied duty of ‘good faith and fair dealing’ need not show that the government’s conduct was ‘specifically targeted’ to reappropriate the contractor’s benefits under the subject contract. Rather, the Federal Circuit reaffirmed the vitality of traditional standards used to prove a breach of the duty of good faith and fair dealing, such as where the government hindered or failed to co-operate with the contractor’s performance so as to ‘destroy the [contractor’s] reasonable expectations… regarding the fruits of the contract’.

In so holding, the Federal Circuit reversed the trial decision of the US Court of Federal Claims, which itself had adopted the ‘specific targeting’ standard from the Federal Circuit’s own 2010 decision in Precision Pine & Timber Inc v United States, 596 F.3d 817 (Fed. Cir. 2010). In Metcalf, the Federal Circuit held that the trial court applied ‘an unduly narrow view of the duty’ and that the Precision Pine standard was limited to the context of that case.

The Metcalf decision provides a certain degree of clarity to a venerable doctrine — the duty of good faith and fair dealing — that recently has been obfuscated by cases such as Precision Pine, where the court articulated a novel standard that it now explains applies in only very limited circumstances. Metcalf generally signals a return to the reasonable conduct standard that prevailed before Precision Pine. The case, thus, also signals the ongoing viability for contractors of a cause of action for government breach of the duty of good faith and fair dealing…

Click on the link below to read the rest of the Pillsbury briefing.

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