Monday, December 20, 2021

Fourth Circuit Analyzes Settlement Language and Parties Intent in Contract Dispute.

 East Coast Repair & Fabrication, LLC v. U.S., 16 F.4th 87 (2021).

    Recently the United States Court of Appeals for the Fourth Circuit issued an opinion analyzing language in a settlement agreement to determine if the agreement allowed for any additional claims to be made by East Coast Repair and Fabrication (Appellees).

    The Court ultimately held that the agreement did not allow for any additional claims to be made and affirmed the ruling of the United States District Court for the Eastern District of Virginia, at Norfolk. The decision dismissed the claim of East Coast Repair and Fabrication, LLC by granting summary judgement under Fed. R. Civ. P. 56(a).

    This case arose from a dispute between East Coast Repair and the United States over contracts for the repair of three United States Navy ships. The parties signed a settlement agreement that precluded East Coast from seeking any additional claims under this matter, yet East Coast still filed this suit to seek $437,000 in damages in which it claims the Government withheld from payment under one of the contracts.

    The three ships and contracts in which this case entails are the Tempest, Hurricane, and Thunderbolt. This case stems from the Hurricane contract, but a brief history must be noted regarding the Tempest contract. In 2013, the U.S. Navy claimed $474,600 in liquidated damages under the Tempest contract due to a later delivery. At the time, the Navy had already paid all but $1,000 for the work on the Tempest, so it withheld a $473,600 set-off from payment to East Coast under the Hurricane ship contract.

    Appellees claimed that the Navy caused the delay and requested additional compensation for work on the Tempest as well as the liquidated damages. In 2014, the request was denied and East Coast filed suit in the Federal District Court under the Tempest contract. It claimed that the $473,600 setoff in which was withheld was assessed on the Tempest, not the Hurricane. Both parties then settled the Tempest suit in 2017. In the settlement agreement, each party released the other from liability in broad, but not identical terms. The Appellees then filed suit now claiming the $473,600 as breach to the Hurricane contract. The parties both filed motions for Summary Judgment, the Court granted the respondent’s motion on the grounds of Res Judicata.

    The Court analyzed the wording of the settlement agreement and states that if a claim is resolved in a settlement agreement, we then look to the intent of the parties.  The Court found that the Appellees released the U.S. from liability for any and all claims arising out of or in any way relating to the Tempest and that in the suit regarding the Tempest, the Appellees stated the $473,600 setoff as being damages assessed on the Tempest. The Appellees were unable to offer any evidence showing that the parties’ intent to intentionally omit a release of a claim for the setoff in drafting the two releases; the absence of any reservation in the settlement agreement thus bars the ship repair companies’ claims that these damages were outside of the scope of the settlement.

-Kari Gallagher, Law Clerk.

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