                 ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeals of --                                 )
                                              )
ABS Development Corporation                   )      ASBCA Nos. 60022, 60023
                                              )
Under Contract No. W912GB-10-C-0047           )

APPEARANCES FOR THE APPELLANT:                       Thomas R. Krider, Esq.
                                                     Howard W. Roth III, Esq.
                                                     Ashley J. Sherwood, Esq.
                                                      Oles Morrison Rinker & Baker, LLP
                                                      Seattle, WA

APPEARANCES FOR THE GOVERNMENT:                      Thomas H. Gourlay, Jr., Esq.
                                                      Engineer Chief Trial Attorney
                                                     Brett R. Howard, Esq.
                                                     Paul Cheverie, Esq.
                                                     Nancy van Noortwijk-Sommer, Esq.
                                                      Engineer Trial Attorneys
                                                      U.S. Army Engineer District, Europe

          OPINION BY ADMINISTRATIVE JUDGE MCILMAIL ON THE
            GOVERNMENT'S MOTION TO AMEND ITS ANSWERS

Introduction

       The government seeks to amend its answers in ASBCA Nos. 60022 and 60023
to assert the defense that the contract referenced above is void ab initio, and, in
ASBCA No. 60023, to assert the contention that it is not responsible for the sovereign
acts of the Government of Israel. We allow the amendments.

Void ab initio

       In ASBCA Nos. 60022 and 60023, the government wants to amend its answers
to assert allegations that the contract referenced above "was obtained by and is tainted
by fraud, and hence is void ab initio and [appellant] cannot recover on its claims"
(ASBCA No. 60022 (60022), amended answer at 1-3, iiiI 55-61, ASBCA No. 60023
(60023), amended answer at 1-3, irir 5-11 (italics in originals)). Appellant, citing
41 U.S.C. § 7103(a)(5), Contract Disputes Act, and Supply & Service Team GmbH,
ASBCA No. 59630, 17-1 BCA iI 36,678, says that we do not possess jurisdiction to
entertain such a defense here because no third party has made factual determinations
regarding any alleged fraud (60022, app. opp'n at 4-7; 60023, app. opp'n at 4). We
disagree that we need any third-party determination here; we possess jurisdiction to
determine for ourselves whether a contract is void ab initio because of fraud. See
International Oil Trading Company, ASBCA No. 57491 et al., 13 BCA ~ 35,393 at
173,658 (bribery and fraud; discussing 41 U.S.C. § 7103); Servicios y Obras Isetan
S.L., ASBCA No. 57584, 13 BCA ~ 35,279 at 173,162 (fraud in the inducement).
Supply & Service Team does not require a contrary result, that appeal did not involve
whether a contract was void ab initio.

       Appellant also cites Laguna Construction Company v. Carter, 828 F.3d 1364
(Fed. Cir. 2016), but that opinion also, does not require a contrary result here. In
Laguna the court recited the rule that "[ c ]ertain fraud-related claims are outside of the
Board'sjurisdiction ... [t]hese include claims relating to 41 U.S.C. § 7103 (formerly
41 U.S.C. § 604), 28 U.S.C. § 2514 (Special Plea in Fraud), and 31 U.S.C. §§ 3729-31
(False Claims Act)." Id. at 1368 (emphasis added, internal citations omitted). Whether
a contract is void ab initio is none of those. There is a big difference between whether a
contract is void ab initio (in which the question is whether the contractor can establish
that he has a contract with the government in the first place, see Atlas International
Trading Corp., ASBCA No. 59091, 15-1BCA~35,830 at 175,198 (contract obtained
through bribery void ab initio)), and whether (as in Laguna) the government is asserting
the type of fraud claim that we do not possess jurisdiction to entertain.

       For these reasons, we possess jurisdiction to entertain the government's proposed
void ab initio amendments; therefore, our jurisdiction is no bar to amendment. Appellant
also says that, assuming we have jurisdiction, the amendments should not be allowed
because, it says, there is no fraud (60022, app. opp'n at 8; 60023, app. opp'n at 4).
However, that is a merits issue for a hearing.

       Appellant also says that, at this point amendment would unduly prejudice it
(60022, app. opp'n at 11-13; 60023, app. opp'n at 4-5). We permit amendment upon
conditions fair to both parties, Board Rule 6( d), and see no unfairness in allowing
amendment here. We are not on the eve of trial (scheduled for April 10, 2018), and the
proposed amendment concerns matters such as what appellant's president said at a
deposition held only a few months ago regarding whether appellant "intentionally
induced the US Government to award the contract to [appellant] even though they had no
intention of performing the contract" (60022, amended answer at 2, ~ 58; 60023 amended
answer at 2, ~ 8). Presumably, appellant is already aware of the facts that bear upon that
issue. We allow the proposed amendments.

Sovereign Acts of a Foreign Government

        In ASBCA No. 60023, the government wants to amend its answer to include
the following contention:



                                            2
               The U.S. government is not responsible for the sovereign
               acts of a foreign nation. Control over base access on this
               project was the sole responsibility of the Government of
               Israel. A warranty covering the actions of a third party
               cannot be held to exist in a government contract unless the
               terms of the alleged warranty are unmistakable. The
               contract does not contain an express or implied warranty
               regarding the ability of [appellant] to receive approval by
               the Government of Israel for base access for Turkish
               workers.

(60023, amended answer at 1, ~ 4) Appellant's opposition is based on its view that
those contentions are not (using appellant's term) "viable" (60023, app. opp'n at 5, 9).
That is, appellant contends that, "[g]iven that the contract does contain the implied
warranty the Government's proffered affirmative defense seeks to avoid, the
Government's motion to amend should be denied" (id. at 9). That, too, is a merits
issue, either for a hearing, post-hearing briefing, or both.

       Appellant also says that allowing the government's "foreign sovereign acts"
contention would cause it undue prejudice (see 60023, app. opp'n at 5). Again we are
not on the eve of trial; moreover, the government's contentions appear to consist
almost entirely of questions of law. In any event, appellant points to no specific
prejudice. We see no unfairness in allowing the amendment, and allow it.

Conclusion ·

      The proposed amendments to the answers in these appeals are allowed.

      Dated: 30 August 2017




                                                  ~~
                                                  Administrative Judge
                                                  Armed Services Board
                                                  of Contract Appeals


(Signatures continued)




                                            3
 I concur                                      I concur



 RICHARD SHACKLEFORD                           J. REiffPROUTY
 Administrative Judge                          Administrative Judge
 Acting Chairman                               Vice Chairman
 Armed Services Board                          Armed Services Board
 of Contract Appeals                           of Contract Appeals



     I certify that the foregoing is a true copy of the Opinion and Decision of the
Armed Services Board of Contract Appeals in ASBCA Nos. 60022, 60023, Appeals of
ABS Development Corporation, rendered in conformance with the Board's Charter.

      Dated:



                                               JEFFREY D. GARDIN
                                               Recorder, Armed Services
                                               Board of Contract Appeals




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