In the United States Court of Federal Claims

No. 12-204C

(Filed: October 27, 2015)

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DMS IMAGING, INC.,

Plaintiff,

v.

THE UNITED STATES,

Defendant.

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Contract Disputes Act, 41 U.S.C. 

§ 7100 et seq; Breach of 

Contract; Risk of Loss Clause; 

Specific Performance; Prompt 

Payment Act, 31 U.S.C. § 

3902(a); Constructive 

Termination; Frustration of 

Purpose Doctrine; Damages; 

Causation; Foreseeability;

Reasonable Certainty; Interest;

Attorney’s Fees.

Mark J. Fink, Cozen O’Conner, The Army Navy Building, 1627 I Street NW, Suite 1100, 

Washington, D.C. 20006, for Plaintiff. Philip T. Carroll and Marisa L. Saber, Cozen O’Conner, 

333 W. Wacker Dr., Suite 1900, Chicago, IL 60606, for Plaintiff. 

Benjamin Mizer, Robert E. Kirschman, Jr., Martin F. Hockey, Jr., and Michael D. Austin, 

U.S. Department of Justice, Civil Division, Commercial Litigation Branch, P.O. Box 480, Ben 

Franklin Station, Washington, D.C. 20044, for Defendant. 

_________________________________________________________

OPINION AND ORDER

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WILLIAMS, Judge.

This Contract Disputes Act (“CDA”) case comes before the Court following a trial on 

damages. In a previous opinion this Court found Defendant liable for breach of contract. DMS 

Imaging, Inc. v. United States, 115 Fed. Cl. 794 (2014). Plaintiff, DMS Imaging, Inc. (“DMS”) 

claims damages for itself and as a pass-through for its insurer, United States Fire Insurance 

Company (“USFIC”), stemming from the Government’s breach of a lease agreement for a 

magnetic resonance imaging (“MRI”) mobile unit. Plaintiff claims damages of $907,209.33, 

consisting of $713,823.33 for the fair market value of the MRI unit, $416,000 for eight months 

of unpaid lease payments, and $2,886 for travel expenses to investigate damage to the unit, 

minus $500 for the salvage value of the unit and $225,000 received from a tort settlement with a 
2

third party.1 Additionally, Plaintiff claims late payment fees and service fees on the unpaid lease 

payments, and attorney’s fees and costs under the contract. Finally, Plaintiff claims interest 

under the CDA. 

The Court awards Plaintiff its claimed damages of $907,209.33. In addition, Plaintiff is

entitled to reasonable attorney’s fees and litigation costs, and contractual late payment fees and 

service fees on the eight unpaid lease payments in an amount to be determined in further 

proceedings. Plaintiff may be entitled to interest calculated pursuant to 41 U.S.C. § 7109(a)(1) 

so long as such interest does not constitute “payment of interest on interest liability.” See Stone 

Forest Indus., Inc. v. United States, 973 F.2d 1548, 1553-54 (Fed. Cir. 1992). 

Findings of Fact2

Formation of the Parties’ Contract and Key Terms

On September 16, 2008, DMS and the United States Department of Veterans Affairs 

(“VA”) entered into contract number VA248-08-RP-0455. DX 1.1. This contract was a solesource contract based on the VA’s need for a mobile MRI unit. Tr. 55-56. Both parties signed 

the first page of the contract, Standard Form 1449 (“SF 1449”). DX 1.1. Contracting Officer 

 

1

Plaintiff’s $907,209.33 demand constitutes DMS’s damages computed in accordance

with the contract’s express terms. This figure can also be broken down into DMS’ insured losses 

and its losses not covered by insurance. Insured losses were computed by adding $605,490 for 

the cash value of the MRI unit plus $208,000 for four months of lease payments and $2,886 for 

investigation expenses, and then subtracting $100,000 for DMS’ insurance deductible for a total 

of $716,376. To compute its uninsured losses, DMS added $208,000 for four months of unpaid 

rent plus $100,000 for DMS’ insurance deductible plus $108,333.33 representing the difference 

between the actual cash value and the fair market value of the MRI unit for a total of 

$416,333.33. Adding together the insured and uninsured totals, DMS’ claimed losses amount to 

$1,132,709.33, from which DMS subtracts $500 for the salvage value of the MRI unit and 

$225,000 for its prior tort settlement, arriving at a total of $907,209.33. Tr. 236-38. 

DMS inconsistently suggests that it is entitled to add $100,000 representing its deductible 

to the $907,209.33 total, which would yield a recovery of $1,007,209.33, but then does not 

include this extra $100,000 in its damages claim. Compare Pl.’s Post-Trial Br. 8-9 with Pl.’s 

Post-Trial Br. 2, 15-16. The Court finds that DMS is not entitled to an additional $100,000 

representing its deductible given that this amount is not a proper element of damages under the 

contract, and is in any event, subsumed within DMS’ claim for $907,209.33.

2

These findings of fact are derived from the record developed during a three-day trial and 

from the Court’s summary judgment opinion on liability, DMS Imaging, Inc. v. United States, 

115 Fed. Cl. 794 (2014). Additional findings of fact are in the discussion. The Court uses “PX” 

to cite Plaintiff’s exhibits and “DX” to cite Defendant’s exhibits. At trial, Plaintiff called Jeff 

Axelrod, Connie Hammes, and John Petrillo as fact witnesses and Jerome Hammar as an expert 

witness in the field of “equipment assessment and evaluation.” Tr. 335. Defendant called 

Awilda Perales as a fact witness and did not call any expert witness. 
3

Awilda Perales signed on behalf of the VA, while Jeff Axelrod signed on behalf of DMS. Ms. 

Perales was a supervisory contract specialist and contracting officer and Mr. Axelrod was DMS’ 

senior vice president. Tr. 13, 254. Under “Schedule of Supplies/Services,” the contract stated:

LEASE ON ONE (1) SIEMENS MOBILE MRI SYSTEM TO RADIOLOGY 

SERVICE AT VA CARIBBEAN HEALTHCARE SYSTEM, SAN JUAN, 

PUERTO RICO IN ACCORDANCE WITH APPROVED CONTRACTOR’S 

LEASE AGREEMENT 090408A AND ATTACHED CONTRACT TERMS 

AND CONDITIONS.

DX 1.1. Under this contract, the VA agreed to lease DMS’ MRI unit for a period of nine 

months, paying $65,000 for the first month and $52,000 for each month thereafter. DX 1.3. The 

lease agreement also contained the specification details of the MRI mobile unit in an “Equipment 

Description” attached as Exhibit A. DX 1.15-1.23. 

The parties revised the lease agreement three times, altering the equipment components 

of the MRI mobile unit. Tr. 61; DX 1.8. In its final version, “Revision 4,” the lease agreement 

placed the responsibility for keeping the MRI mobile unit in good repair on DMS. DX 1.8. The 

Risk of Loss clause in the lease agreement addressed damages and destruction of the unit, 

stating:

Lessee shall bear the entire risk of loss, theft, destruction or damage of the leased 

property from any cause whatsoever and no loss, theft, destruction or damage of 

the leased property shall relieve Lessee of the obligation to pay rent or any other 

obligations under this lease. In the event of loss, theft, or damage of any kind to 

the leased property, Lessee, at the option of Lessor, shall place the leased property 

in good condition and repair, or if the leased property is determined by Lessor to 

be lost, stolen, destroyed or damaged beyond repair and if requested by Lessor, 

purchase[] the property at its fair market value immediately preceding the event 

causing the loss.

DX 1.13-1.14. 

The agreement also contained two clauses regarding insurance – a clause requiring the 

VA to maintain liability insurance and property insurance policies on the full replacement value 

of the MRI unit and a clause requiring the VA to name DMS as an additionally insured party 

under an extended insurance policy: 

Department of Veterans Affairs is self insured. Lessee shall maintain, at its 

cost[], comprehensive professional liability insurance coverage for any current or 

future claim, in an amount of not less than that amount required by appropriate 

law, and if none, then not less than $1,000,000.00 per occurrence, $3,000,000.00 

in an aggregate amount, and a minimum of $2,500,000.00 umbrella policy 

coverage with respect to the activities of the Lessee, and shall name the Lessor as 

an additional insured. The Lessee will, at its cost, maintain full property 

insurance on the leased property. The property insurance will be for the full 

replacement value in an amount not less than $2,000,000.00 . . . . The Lessor will 

be named as loss payee on the property policy. The proceeds of such coverage, in 
4

the event of loss or damage, shall be applied, at the Lessor’s option, to the repair 

or replacement of the property affected. Lessee shall provide to Lessor a 

certificate evidencing liability and property insurance. 

DX 1.10. 

The Lessee will at its own expense purchase and maintain extended insurance 

coverage on the leased property naming Lessor as an additional insured. The 

proceeds of such coverage, in the event of loss or damage, shall be applied at the 

Lessor’s option, to the repair or replacement of the property affected. The Lessee 

shall be responsible for any loss or damage to the property from any cause 

whatsoever not included under fire and extended coverage insurance. [. . .]

DX 1.13. 

With respect to late lease payments, the lease agreement provided: 

A late charge of five percent (5%) of any payment not paid when due as 

compensation for Lessor’s internal operating expenses arising as a result of such 

delayed payment, plus a service charge of 1 1⁄2 % per month, not to exceed the 

maximum amount allowed by law, shall be made on any portion of the Lessee’s 

outstanding balance which is not paid when due whether such payments are due 

prior to or after a Default. The lease is a net lease and Lessee shall not be entitled 

to any abatement of, reduction of, or setoff against Lease Payments for any reason 

whatsoever. 

DX 1.12. 

Finally, the lease agreement set forth the following rights of DMS, the lessor, in the event 

of breach:

LESSOR shall be entitled to exercise all rights and remedies under law upon 

breach by Lessee of any terms or conditions herein. In the event that legal or 

other action is required to enforce Lessor’s rights hereunder, Lessee agrees to 

reimburse LESSOR on demand for its reasonable attorneys’ fees and other related 

costs and expenses. 

DX 1.14. The lease agreement also contained a severability clause indicating that if any portion

of the agreement were to be found unenforceable or void, that portion would be severable from 

the rest of the agreement. Id. 

At trial, Ms. Perales, the VA’s Contracting Officer, testified that she had assigned this 

contract to America Quiñones, one of her subordinate contracting specialists, in 2008. Tr. 57. 

According to Ms. Perales, Ms. Quiñones “had some questions” about the contract “because she 

was basically new” and had come to her with “a concern.” Id. Ms. Perales did not recall what

Ms. Quiñones’ concern was. Id. Ms. Perales stated that she had been busy when Ms. Quiñones 

approached her and that she instructed Ms. Quiñones to review a previous 2006 agreement 

between the VA and DMS and “just go with it” if the 2006 lease agreement was “similar or the 

same” to SF 1449. Id. at 155. Although Ms. Perales had not been the contracting officer on the 
5

2006 contract, she understood that the service DMS had provided under that contract had been 

very good. Id. at 125-26. Ms. Perales felt comfortable instructing Ms. Quiñones to use the 2006 

agreement as a basis for the 2008 agreement because she did not believe there had been any 

problems with DMS and its equipment. Id. at 127. Ms. Perales only read the first page of the 

contract, the SF 1449; she did not read the remainder of the 2008 contract or the attached lease 

agreement with its terms and conditions before signing it. Id. at 79. Ms. Perales also did not 

consult with the VA’s legal department about the 2008 contract. Id. at 127. 

Arrival and Destruction of the MRI Unit

On or about October 16, 2008, the MRI mobile unit was delivered and accepted by the 

VA. DMS Imaging, 115 Fed. Cl. at 796. The Radiologic Modalities Supervisor at the San Juan 

medical center signed the certificate of acceptance for the MRI unit on behalf of the VA, 

acknowledging its acceptance and the terms of the lease agreement. Id. Within the first month 

following acceptance, the VA began experiencing “operational issues” with the MRI unit. DX 

3.1, 3.5-3.17; Tr. 165-66. DMS sent someone to repair the unit after each of these occurrences. 

Tr. 166. Although the lease agreement contained an “uptime guarantee” allowing the lessee to 

seek a rebate for any amount of time that the unit was not operational, the VA did not seek such 

a rebate.3 Id.

On December 3, 2008, a fire destroyed the MRI unit. Id. at 81. The fire was found to be 

“likely accidental” by MDE, Inc., a company hired by the VA to investigate the incident. DMS 

Imaging, 115 Fed. Cl. at 796; DX 3.27. DMS sent Jeff Strogan, its operations manager, to 

investigate the damage to the MRI unit in Puerto Rico where he subsequently determined that the 

unit was a total loss. Tr. 273-74. At that point, Mr. Strogan arranged to take possession of the 

MRI unit and hired HRT Trucking to transport and store it. Id. at 423. DMS’ then-parent 

company, Otter Tail Corporation (“Otter Tail”) also sent its risk manager, Pat Murray, to Puerto 

Rico in January 2009, to assess the MRI unit’s damage. Id. at 418; DX 2.59. DMS ultimately 

sold the destroyed MRI unit to HRT Trucking for $500 because there was little demand for the 

machine given “safety concerns” regarding “contamination” and the lack of any useable “assets 

that could be retrieved from the system.” Tr. 424. Messrs. Strogan’s and Murray’s trip expenses 

for their investigations totaled $2,886. DX 2.59. 

Aftermath of the Fire and DMS’ Insurance

As the VA was self-insured, it did not maintain comprehensive liability insurance naming 

DMS as an insured. Cf. DX 1.10. At the time of the fire, Otter Tail had a master insurance 

policy with Crum & Forster, underwritten by USFIC, which covered DMS’ equipment including 

the MRI unit at issue. Tr. 481-83; DX 6; PX D. An endorsement was added to the policy before 

DMS transported the unit to the VA in Puerto Rico, to ensure that the policy covered equipment 

in Puerto Rico. Tr. 398-99, 483; DX 6.82. This policy had a deductible of $100,000 and 

required the “actual cash value” method of valuation to be used in the event of loss. PX D at 

 

3

In the lease agreement, DMS guaranteed that the unit would be operational 90% of the 

time, subject to certain limitations, and agreed to grant a rebate “equal to the daily prorated rental 

rate of the Leased Property for each 1.0% percentage or prorated part thereof below 90%.” DX 

2.40. This rebate was the lessee’s “exclusive remedy” for operational downtime. Id.
6

223, 258; Tr. 401, 488. The policy defined “actual cash value” to be “[t]he amount it would cost 

to repair or replace insured property, on the date of loss, with material of like kind and quality, 

with proper deduction for obsolescence and physical depreciation.” PX D at 258. 

According to Ms. Connie Hammes, DMS’ asset manager charged with tracking the 

movement of mobile MRI units between facilities, DMS decided to make a claim under this 

policy for the MRI unit “because the VA was not willing to follow through with the terms of the 

contract [DMS] had with them.” Tr. 386, 401-02. Crum & Forster paid $716,376 to Otter Tail 

for the net loss of the MRI unit – $816,376 for the unit minus DMS’ $100,000 deductible. DX 

2.56. The $816,376 included $605,490 for the cash value of the MRI unit, $208,000 for four 

months of lease payments at $52,000 per month, and $2,886 for investigation expenses. DX 

2.56, 2.59. Crum & Forster issued a check to Otter Tail in the amount of $716,376 on June 29, 

2009, and this amount was endorsed to DMS. PX F at 2; DX 2.58. Ms. Hammes testified that 

DMS’ “intent upon receiving further settlement was to reimburse Crum & Forster for their 

expense” so that DMS would avoid double recovery. Tr. 427.

On December 12, 2008, DMS informed the VA that the lease provisions incorporated 

into the contract required the VA to insure the MRI unit and that the risk of loss was on the VA, 

and that DMS expected payment for the “full replacement cost” of the destroyed MRI unit. 

DMS offered to provide a replacement unit so MRI services could continue at the VA. DX 4.1-

4.2. Over three months later on March 19, 2009, Ms. Perales responded to DMS’ letter, denying 

that the risk of loss rested on the VA and indicating that while the VA was interested in a 

replacement “no official request was originated.” DX 5.1-5.2. 

In the Spring of 2009, the VA requested proposals for another mobile MRI unit. DMS 

provided a new lease offer. PX C at 2. In April 2009, Ms. Perales determined that there was a 

Service-Disabled Veteran Owned Small Business (“SDVOSB”) that provided MRI leasing and 

found that the SDVOSB’s estimate would be more cost effective than DMS’ and would further 

the VA’s socioeconomic goal of using veteran-owned businesses. Id. at 1. Although Ms. 

Perales had requested authorization to begin the termination for convenience process “on the 

previous contract . . . ,” the VA never formally terminated the contract, either for cause or 

convenience. Tr. 178, 205. 

DMS itself had leased the MRI unit as part of a master lease agreement with Bank One, 

originally signed in July 2000, and on March 26, 2004, DMS entered into a Lease Schedule and 

paid $23,320 per month for this unit for 66 months. DX 7.1; PX L at 1, 8-10. DMS was 

required to make this lease payment even in the event the unit was destroyed. DX 7.8-7.10; PX 

L at 8; Tr. 392-93. Additionally, if the unit could not be returned to Bank One, DMS was 

responsible for buying the unit at the end of the lease term. Tr. 393. 

Following the fire, DMS bought the destroyed MRI unit from Bank One in February 

2009, for $608,806.44. Id. at 402; PX T. After the fire, DMS pursued a tort action, claiming a 

design defect or improper manufacture of the MRI unit and received a settlement of $225,000. 

See DX 3.3; Tr. 424-25. After the fire destroyed the MRI unit, the VA discontinued payments on 

the lease with DMS and did not pay DMS the fair market value of the MRI unit. Tr. 103. 

On June 28, 2011, DMS submitted a claim under the CDA to Contracting Officer Perales 

seeking $954,176 – $716,376 paid by Crum & Forster, including the $605,490 for the MRI unit, 
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and $237,800 for DMS’ uninsured damages, consisting of the $100,000 deductible and $137,800 

for “[l]ost lease payments for April, May with late fees and interest.” DX 2.1-2.2. On January 9, 

2012, Ms. Perales denied DMS’ claim, finding that (1) the contract had been constructively 

terminated when the fire destroyed the MRI mobile unit, (2) DMS improperly brought a claim on 

behalf of its insurer, (3) DMS was at fault for any damage, (4) the lease agreement was not 

enforceable because it was not signed by both parties as required by the availability clause, (5) 

the contract superseded the lease agreement, (6) the Government was not permitted to enter into 

an agreement where its indemnification liability was unlimited,4and (7) DMS was improperly 

seeking a double recovery in its CDA claim and in the tort lawsuit. DX 3.1-3.3.

Expert Testimony Regarding the Fair Market Value of the MRI Unit

Under the Risk of Loss clause contained in the lease agreement, DMS had the right to 

require the Government to purchase the property “at its fair market value immediately preceding 

the event causing the loss.” DX 1.13-1.14. Plaintiff’s expert in equipment assessment and 

valuation, Jerome R. Hammar, calculated the MRI unit’s fair market value prior to loss. Tr. 336. 

Mr. Hammar was awarded a Bachelor of Engineering degree from Youngstown State University 

in 1972. Tr. 321. Mr. Hammar worked as a product engineer and senior product engineer at 

Delphi, a sales engineer at Diamond Shamrock Corporation, the Vice President of Operations at 

Schneller, Inc., and the Vice President Operations and Finance and CEO/President at Store 

Systems & Services, Inc. PX I at 1-2. In 2001, Mr. Hammar founded CEIPS, LLC (“CEIPS”) 

and is currently the CEO and President. Id. at 1. 

CEIPS provides “[c]ommercial equipment valuation and pricing service[s] for the 

insurance property and casualty market nationwide.” Id. CEIPS has provided valuation services 

for many different types of industries, including medical, light manufacturing, heavy 

manufacturing, service industry, restaurants, hotels, markets, machine shops, off-highway 

equipment, planetariums, and kosher manufacturing. Tr. 328. CEIPS has performed over 3,400 

valuations since its founding, and Mr. Hammar estimated that he has performed over 1,500 

personally, 50 of them on medical equipment, including Seimens MRI units like the one in this 

case. Id. at 328-29, 331-32. 

In 2009, Mr. Hammar was retained by Crum & Forster to determine the actual cash value 

of the MRI unit just prior to its destruction in December 2008, for insurance purposes. Mr. 

Hammar calculated the actual cash value to be $605,490. In 2014, DMS asked Mr. Hammar to 

compute the fair market value of the MRI unit as of December 3, 2008, and he determined that 

$713,823.33 was the fair market value.

Mr. Hammar defined fair market value as “the market value of a used piece of equipment 

with a willing buyer and seller, neither of them being under duress.” Id. at 333-34. Next, Mr. 

Hammar used “the market approach,” or “the availability and sale of like kind and quality of 

equivalent equipment of similar age, condition, and operating environment,” to assess the fair 

 

4 While the lease agreement contained a provision requiring the VA as the lessee to 

indemnify the lessor for all claims and/or losses related to the lessee’s use of the leased 

equipment, DMS does not bring any claim against the Government based on this provision. DX 

1.13. 
8

market value of the destroyed MRI prior to loss on the date of the fire, December 3, 2008. Id. at 

333, 338. Mr. Hammar described this approach is “pretty much standard” in the valuation 

industry. Id. at 333. 

Mr. Hammar started his market value analysis by obtaining the specifications for the unit, 

including its components, from DMS. Tr. 338-39. The specifications relevant to Mr. Hammar’s 

analysis were the power of the MRI unit, the functionality of the unit, the ability of the unit to 

make effective finished MRI prints, and the tools necessary for an MRI to focus on specific parts 

of the body. Id. at 339. Mr. Hammar then called Siemens, the manufacturer of the MRI unit, 

and learned that this particular unit was made in 2004, was housed in a mobile trailer, had no 

software upgrades, and no modifications to its components. Id. at 340-42. Siemens informed 

Mr. Hammar that Siemens had a very similar MRI unit available for sale that had been offered to 

DMS as a replacement for $810,000, which included a $110,000 maintenance agreement add-on. 

Id. at 342-44. Mr. Hammar deducted the $110,000 value of this add-on, providing Mr. Hammar 

with one reference value of $700,000 for the MRI unit. Id. at 343-44.

5

 

Mr. Hammar then contacted two other authorized Siemens dealers that sold refurbished 

MRIs to find prices for comparable units. Id. at 344-47. The first company, Block Imaging, 

offered a 2002 unit for $595,000. Id. at 348. Because that unit was two years older than the 

damaged unit, Mr. Hammar made an upward adjustment to this price to $700,490. Id. Mr. 

Hammar also received a price quote from Barrington Medical for a 2004 unit and added an 

adjustment for a mobile trailer to calculate a price of $735,400. Id. at 350-51. After obtaining 

these three price points, Mr. Hammar averaged them to obtain a fair estimate of what “was 

prevalent and available in the marketplace to replace what was damaged.” Id. at 353. Based on 

this average, Mr. Hammar opined that the fair market value to replace the MRI unit as of 

December 3, 2008 – the date the fire destroyed the MRI machine – was $713,823.33. Id. at 354. 

Mr. Hammar was initially engaged by Crum & Forster in 2009, to determine the actual 

cash value of the unit for the destroyed MRI unit, as of the date just prior to its destruction on 

December 3, 2008, for insurance purposes. DX 2.56, 2.60; Tr. 374. During cross-examination, 

Mr. Hammar was asked to explain why the $605,490 amount he calculated to be the actual cash 

value of the machine for Crum & Forster differed from his later fair market value of $713,823.33

for DMS. According to Mr. Hammar, actual cash value “is determined as a depreciated value of 

a piece of equipment taking into consideration age, working conditions, maintenance, 

environment” and the “effective life of the equipment.” Tr. 361. Fair market value, by contrast, 

does not consider depreciation. Id. In order to compute a fair market value when hired by DMS 

to do so in May 2014, Mr. Hammar used the information he had previously gathered for Crum & 

Forster in 2009. Id. at 373. The Government did not proffer any expert testimony to counter 

Plaintiff’s expert’s opinion on fair market value.

Procedural History

Plaintiff filed its complaint in this Court on March 29, 2012, appealing Ms. Perales’ 

denial of its CDA claim and alleging that the VA breached the terms of its contract. The parties 

subsequently filed cross-motions for summary judgment on liability and, on April 30, 2014, the 

 

5

In his expert report, Mr. Hammar indicated that the final price of this unit, with delivery, 

was $705,490.
9

Court granted in part Plaintiff’s motion and found Defendant liable under the Risk of Loss 

clause. DMS Imaging, 115 Fed. Cl. at 799. The Court held that the lease agreement, including 

the terms and conditions section containing the Risk of Loss clause, was part of the parties’ 

contract. Id. at 798. The Court did not reach the issue of whether Defendant was liable for 

Plaintiff’s insurance deductible as the record on that issue was not sufficiently developed. Id. at 

800. Nor did the Court address Plaintiff’s entitlement to damages or the amount of damages. Id. 

The Court conducted a trial on damages on September 4, 2014 and October 22-23, 2014. The 

parties filed several post-trial motions including motions to amend pleadings out of time, a 

motion to strike the testimony of Contracting Officer Perales, a motion to dismiss, and a motion 

for default judgment. 

Discussion

Defendant’s Motion to Dismiss6

As part of its Post-Trial Brief, Defendant filed a motion to dismiss for lack of subjectmatter jurisdiction under Rule 12(b)(1) of the Rules of the Court of Federal Claims, asserting that 

Plaintiff’s suit was a request for specific performance guised as a damages action. Defendant 

interprets DMS’ statements that it is seeking only what it is owed under the parties’ contract as a 

demand that the Court “enforce” the terms of the lease agreement, and force Defendant to lease 

the MRI machine for the period of time prescribed in the lease agreement. Def.’s Post-Trial Br.

10-14. Plaintiff, however, emphasizes that it is not requesting specific performance, but rather 

seeks only monetary payment “for the express stipulated damages” set forth in the parties’ 

agreement. Pl.’s Resp. 7-12. 

“The objection that a federal court lacks subject-matter jurisdiction . . . may be raised by 

a party, or by a court on its own initiative, at any stage in the litigation, even after trial and the 

entry of judgment.” Arbaugh v. Y & H Corp., 546 U.S. 500, 506 (2006). On a motion to dismiss 

for lack of subject-matter jurisdiction, the Court assumes all factual allegations to be true, and 

will construe the complaint in a light most favorable to the nonmoving party, in this case, DMS. 

Pennington Seed, Inc. v. Produce Exch. No. 299, 457 F.3d 1334, 1338 (Fed. Cir. 2006). Plaintiff 

bears the ultimate burden of establishing jurisdiction by a preponderance of the evidence. 

Reynolds v. Army & Air Force Exch. Serv., 846 F.2d 746, 748 (Fed. Cir. 1988). 

Specific performance is an exceptional contractual remedy only available to an aggrieved 

party if money damages would otherwise be inadequate to provide it the benefit of the bargain 

under the contract. Union Pac. Ry. Co. v. Chi., R. I. & P. Ry. Co., 163 U.S. 564, 600 (1896) 

(“[S]pecific performance . . . rests on the ground of the inadequacy and incompleteness of the 

remedy at law.”). Here, money damages are adequate to compensate Plaintiff for an eventuality 

contemplated and bargained for by the parties – the destruction of the MRI unit while in 

Defendant’s custody. The parties agreed in the underlying lease agreement to the monetary 

remedy for an occurrence that transpired – if the MRI unit were destroyed, the Government as 

 

6

In its Post-Trial Motion to Dismiss, Defendant argued that DMS could not bring suit for 

the use and benefit of USFIC and suggested that DMS might receive a “double recovery.” Def.’s

Post-Trial Br. 19-23. Defendant has subsequently “expressly withdraw[n]” this argument. See

Def.’s Reply 4. 
10

lessee was to pay the fair market value of the unit, the remainder of the lease payments, late 

payment fees, and attorney’s fees in the event of litigation. These agreed-upon elements of 

damages are not a request for performance, but a measure of what is owed in the event the 

contract is not being performed. 

Defendant relies on Massie v. United States to argue that the Court cannot award DMS 

the damages spelled out in the parties’ agreement in lieu of lump-sum damages because this 

would be equitable “enforcement” of the agreement. 45 Fed. Cl. 213, 215 (1999), rev’d, 226 

F.3d 1318 (Fed. Cir. 2000). In Massie, the Federal Circuit reversed the trial court’s breach of 

contract remedy requiring the Government to purchase an annuity, and held that the imposition 

of such remedy amounted to an “unambiguous mandatory” duty on the part of the Government 

akin to specific performance. 226 F.3d at 1322. The Federal Circuit thus found it beyond the 

jurisdiction of the Court of Federal Claims to require the Government to purchase a specific 

financial instrument in lieu of awarding a lump-sum monetary payment – the traditional remedy 

for breach of contract. Id. Massie is inapposite. Here, the Plaintiff is only seeking, and the 

Court is only awarding, damages. Defendant’s motion to dismiss for lack of subject-matter 

jurisdiction is denied.7

There Was Mutuality in the Contract’s Formation

In its Post-Trial Briefs, the Government persists in arguing that there was no “meeting of 

the minds” regarding the applicability of the “terms and conditions” under the lease. See Def.’s 

Post-Trial Br. 1-2; Def.’s Reply 1. The Court resolved this issue in its liability opinion and 

expressly held that the parties’ contract included the attached lease “along with its ‘terms and 

conditions.’” DMS Imaging, 115 Fed. Cl. at 798. The Court found Defendant liable under the 

Risk of Loss clause. Id. at 799-800. The Court recognizes that this lease agreement placed 

significant risk on the VA as the lessee in the event of destruction of the MRI unit. However, a 

Contracting Officer with requisite authority entered into this contract and accepted this risk in a 

sole source situation where a government hospital was in need of a critical diagnostic tool. The 

lease agreement for the MRI unit was enforceable, partially performed, and clearly breached. 

Once the unit was destroyed, the VA had the contractual obligation to reimburse DMS the unit’s

fair market value and other agreed-upon payments. DMS’ entitlement to damages and the 

amount of damages are the only issues before this Court. 

 

7

In seeking dismissal, Defendant argued in its Reply that because Plaintiff’s CDA claim to 

Contracting Officer Perales only included a request for $605,490 for the MRI unit, arguably 

Plaintiff’s claim for the fair market value in the amount of $713,823.33 constituted a new claim 

which had not been presented to the contracting officer for decision. Def.’s Reply 7. The Court 

does not view this increase in the quantum sought as a new claim. Plaintiff asked the 

Contracting Officer and this Court to reimburse it for the amounts due as specified by the 

contract. See Quimba Software, Inc. v. United States, 120 Fed. Cl. 107, 112 (2015) (finding that 

a claim for relief presented to this Court need not be voiced in the exact same language as the 

original claim before the Contracting Offer, so long as the two claims are grounded in the same 

underlying facts and require the same kind of proof (citing Scott Timber Co. v. United States, 

333 F.3d 1358, 1365 (Fed. Cir. 2003); Affiliated Constr. Grp., Inc. v. United States, 115 Fed. Cl. 

607, 612 (2014))). 
11

Damages for Breach of Contract

The non-breaching party is entitled to expectation damages, i.e. relief “sufficient to place 

the injured party in as good a position as he or she would have been had the breaching party fully 

performed.” San Carlos Irrigation & Drainage Dist. v. United States, 111 F.3d 1557, 1563 (Fed. 

Cir. 1997) (citing Estate of Berg v. United States, 687 F.2d. 377 (Ct. Cl. 1982)). 

To recover expectation damages for a breach of contract, a plaintiff must establish that 

(1) the breach caused the requested damages; (2) the damages were reasonably foreseeable at the 

time the contract was formed; and (3) the measure of damages are reasonably certain. See, e.g., 

SGS-92-X003 v. United States, 118 Fed. Cl. 492, 524 (2014) (citing Kan. Gas & Elec. Co. v. 

United States, 685 F.3d 1361, 1369 (Fed. Cir. 2012) (internal citations omitted)) Causation, 

foreseeability, and proof of damages are issues of fact. See Anchor Sav. Bank, FSB v. United 

States, 597 F.3d 1356, 1361 (Fed. Cir. 2010). Plaintiff has the burden of proof on the three 

elements. SGS-92-X003, 118 Fed. Cl. at 524 (citing Yankee Atomic Elec. Co. v. United States

(“Yankee II”), 536 F.3d 1268, 1273 (Fed. Cir. 2008). 

The Court Awards Plaintiff the Fair Market Value of the MRI Unit

Plaintiff claims damages of $713,823.33 for the fair market value of the MRI unit. Under 

the Risk of Loss clause, Defendant agreed to pay for the MRI unit “at its fair market value 

immediately preceding the event causing the loss.” DX 1.13-1.14. 

Causation

Plaintiff has the burden of proving that its damages resulted from the Government’s 

breach of the agreement. The Court must determine which legal standard to apply in assessing 

causation, as it has discretion to choose from the “but for” or “substantial factor” standard. See

Citizens Fed. Bank v. United States, 474 F.3d 1314, 1318 (Fed. Cir. 2007) (“[T]he selection of 

an appropriate causation standard depends upon the facts of the particular case and lies largely 

within the trial court’s discretion.”). Under the “but for” test, the plaintiff must show that the 

claimed losses “would not have occurred but for the breach,” although the breach need not be the 

sole cause to recover damages. Cal. Fed. Bank. v. United States, 395 F.3d 1263, 1268 (Fed. Cir. 

2005); Anchor Sav. Bank, FSB v. United States, 81 Fed. Cl. 1, 60 (2008). The plaintiff must 

further show that damages flow “inevitably and naturally” from the breach. Citizens Fed. Bank, 

474 F.3d at 1318 (quoting Myerle v. United States, 33 Ct. Cl. 1, 27 (1897)). On the other hand, 

“[t]he substantial factor standard is properly invoked when the parties assert multiple possible 

causes for the claimed damages.” Am. Sav. Bank, F.A. v. United States, 98 Fed. Cl. 291, 301 

(2011) (citing Citizens Fed Bank, FSB v. United States, 59 Fed. Cl. 507, 514-16 (2004)). 

Here, the Court will apply the “but for” standard, as Plaintiff does not assert that any 

factor other than the Government’s refusal to pay Plaintiff under the terms of the lease agreement 

constituted the breach. Specifically, the instant breach occurred after the MRI unit was 

destroyed by virtue of Defendant’s failure to honor its obligations under the express terms to the 

lease – to pay the fair market value of the machine, the remaining lease payments due, and any 

late payments and other fees. Pl.’s Post-Trial Br. 3. The but for causation of Plaintiff’s loss is 

obvious here. The risk of destruction of the MRI unit was contemplated in the parties’ lease 
12

agreement and assigned to the VA as the Lessee. Defendant’s failure to pay the specified 

damages caused Plaintiff’s loss. 

Foreseeability

Foreseeability means that “the injury actually suffered must be one of a kind that the 

defendant had reason to foresee and of an amount that is not beyond the bounds of reasonable 

prediction.” Citizens Fed. Bank, 474 F.3d at 1321 (quoting Joseph M. Perillo, 11 Corbin on 

Contracts § 56.7 at 108 (2005 rev. ed.)). Damages must be “reasonably foreseeable by the 

breaching party at the time of contracting.” Vt. Yankee Nuclear Power Corp. v. Entergy Nuclear 

Vt. Yankee, LLC, 683 F.3d 1330, 1344 (Fed Cir. 2012) (internal citations and quotation marks 

admitted). “[T]he particular details of a loss need not be foreseeable,” as long as the “specific 

mechanism of loss” was foreseeable. Anchor Sav. Bank, FSB, 597 F.3d at 1362, 1364. The 

terms of the lease agreement themselves made Plaintiff’s claims foreseeable – the parties agreed 

what the monetary measure of damages would be in the event of the destruction of the unit. This 

contract and lease agreement contemplated that there could be a loss or destruction of the MRI 

unit and placed the risk of that loss on the VA, providing that the VA had to pay the lessor the 

fair market value of the unit and other specified payments in the event such loss occurred. 

Reasonable Certainty

A plaintiff must show a damages amount with reasonable, not absolute, certainty, “[i]t is 

enough if the evidence adduced is sufficient to enable a court or jury to make a fair and 

reasonable approximation.” Elec. & Missile Facilities v. United States, 416 F.2d 1345, 1358 (Ct. 

Cl. 1969) (quoting Specialty Assembling & Packing Co. v. United States, 355 F.2d 554, 572 (Ct. 

Cl. 1966); WRB Corp. v. United States, 183 Ct. Cl. 409, 425 (1968)). “If a reasonable 

probability of damage can be clearly established, uncertainty as to the amount will not preclude 

recovery.” Ace-Federal Reporters, Inc. v. Barram, 226 F.3d 1329, 1333 (Fed. Cir. 2000) 

(quoting Locke v. United States, 283 F.2d 521, 524 (Ct. Cl. 1960)). 

Mr. Hammar, Plaintiff’s expert in equipment assessment and valuation, testified as to the 

fair market value of the MRI unit and his method of calculating this value. Mr. Hammar defined 

three ways to value the MRI unit on December 3, 2008: actual cash value of the destroyed MRI 

accounting for depreciation ($605,490), fair market value of a similar used MRI unit 

($713,823.33) and replacement cash value to purchase a new MRI machine ($1,455,990). Tr. 

354, 366, 370-71. The Court found Mr. Hammar credible and his determination of a fair market 

value of $713,823.33 to be well reasoned and supported by his research on comparable MRI 

units. Mr. Hammar clearly and competently described his valuation process and how the fair 

market value of the unit was calculated. The Court accepts Mr. Hammar’s uncontroverted 

valuation and finds that the fair market value of the MRI unit as of December 3, 2008, was 

$713,823.33. DMS’ damages for the fair market value were caused by the breach, were 

foreseeable at the time of contracting, and have been set forth with reasonable certainty through 

the work of Mr. Hammar. 

Defendant attacks DMS’ entitlement to damages representing the fair market value of the 

MRI unit on the basis that DMS did not “incur” a loss in this amount. See Def.’s Post-Trial Br. 

19-21; Def.’s Reply 8-10. Defendant asserts that the most DMS can claim as damages is 

$608,806.44, representing the payment it made to purchase the MRI unit from Bank One. Def’s 
13

Reply 9. However, the value of the unit in the event of loss or destruction was defined by the 

contract to be the fair market value, not the actual losses incurred by DMS, the actual cash value 

of the unit paid to DMS through its insurance policy, or the replacement value of the MRI unit. 

It is not within this Court’s purview to rewrite the parties’ bargain. Plaintiff is entitled to the fair 

market value of the MRI unit, as of December 3, 2008, prior to its destruction, in the amount of 

$713,823.33, as an element of its expectancy damages. 

The Court Awards Plaintiff the Unpaid Lease Payments

Plaintiff claims $416,000 for eight months of unpaid lease payments at $52,000 per 

month. The parties do not dispute that their contract required the Government to pay $65,000 for 

the first month of the lease, $52,000 for each of eight months thereafter, and that only the first 

month was paid. DX 1.3; Tr. 102-03. The parties also do not dispute that the Risk of Loss 

clause stated that “no loss, theft, destruction or damage of the leased property shall relieve 

Lessee of the obligation to pay rent or any other obligations under this lease.” DX 1.13. Had

Defendant performed its obligation as specified in the Risk of Loss clause, Plaintiff would have 

received the remaining eight months of lease payments. Damages in the amount of $416,000 

were thus caused by the breach, foreseeable and reasonably certain, as the obligation to pay the 

remaining lease payments in the event of loss is expressly set forth in the contract and capable of 

calculation with precision. 

Defendant challenges Plaintiff’s entitlement to these damages on multiple fronts. First, 

Defendant asserts that the Prompt Payment Act, 31 U.S.C. § 3901-07, “precludes the 

Government from making payment for goods or services not received.” Def.’s Post-Trial Br. 23; 

see also Tr. 103 (“[A]ccording to the Prompt Payment Act, the Government only pays for 

services delivered.”). The heart of the Prompt Payment Act is the requirement that

[T]he head of an agency acquiring property or service from a business concern, 

who does not pay the concern for each complete delivered item of property or 

service by the required payment date, shall pay an interest penalty to the concern 

on the amount of the payment due. The interest shall be computed at the rate of 

interest established by the Secretary of the Treasury, and published in the Federal 

Register, for interest payments under section 7109(a)(1) and (b) of title 41, which 

is in effect at the time the agency accrues the obligation to pay a late payment 

interest penalty.

31 U.S.C. § 3902(a) (2012); See generally Ocean Tech., Inc. v. United States, 19 Cl. Ct. 288, 

289-90 (1990) (stating that “[t]he Prompt Payment Act provides that a governmental agency 

shall pay a contractor interest on complete, delivered property or services, with certain 

exceptions, beginning on the date on which payment should have been made under the contract 

or 30 days after submission of an invoice.”).

The purpose of the Prompt Payment Act is to “provide incentives for the Federal 

Government to pay its bills on time.” Id. at 290 (quoting H. Rep. No. 461, 97th Cong., 2d Sess. 

1, reprinted in 1982 U.S. Code Cong. & Admin. News 111). This statutory scheme is not, 

however, pertinent to the instant case, as Plaintiff does not seek interest under the Prompt 

Payment Act. There is nothing in the Prompt Payment Act that prohibits the Government from
14

fulfilling its contractual obligation to pay lease payments on a leased MRI unit when the unit was 

destroyed while in the Government’s possession. 

The provision is not unenforceable simply because it was not a particularly favorable 

term for the Government. See The Meyer Grp., Ltd. v. United States, 121 Fed. Cl. 105, 123 

(2015) (recognizing the binding force of an agreement the Government entered into “without 

negotiating” or “changing one word of the broker’s proposed contractual language.”). On the 

contrary, when the Government enters the commercial marketplace, it sheds its sovereign mantle 

and must honor its bargains just as any other contracting party. United States v. Winstar Corp., 

518 U.S. 839, 870-71 (1996) (affirming that when the Government contracts as a private party a 

Court must apply “ordinary principles of contract construction and breach that would be 

applicable to any contract action between private parties.”); Lynch v. United States, 292 U.S. 

571, 579 (1934) (“When the United States enters into contract relations, its rights and duties 

therein are governed generally by the law applicable to contracts between private individuals.”).

In another tack to avoid these lease payments, Defendant argues that the contract was 

“constructively terminated” at the time of the fire, advancing the theory that because “[t]he fire 

destroyed the object of the lease[,] [t]he Government’s obligations under the contract ended at 

that point.” Def.’s Post-Trial Br. 23. However, this position is at odds with both the lease 

agreement and established precedent. As this Court explained in its liability opinion, the 

Government may be held liable as a lessee for the destruction of leased property under contract. 

DMS Imaging, 115 Fed. Cl. at 799. For example, in S.W. Aircraft, Inc. v. United States, the 

Government was held liable for the destruction of a leased helicopter because the Government 

assumed the risk of loss for all damages to the helicopter that occurred during flights under an

elevation level of 500 feet. 551 F.2d 1208, 1211 (Ct. Cl. 1977). In Container Co. v. United 

States, the Government leased a building and agreed that it would not overload any leased 

structure and would “immediately repair” any damage caused by loading. 90 F. Supp. 689, 692-

93 (Ct. Cl. 1950). The building was subsequently destroyed by a fire caused by overloading, and 

the Court found the Government liable for the cost of repairing or rebuilding the destroyed 

structure. Id. at 691-93, 695. 

In the instant case, as in S.W. Aircraft and Container Co., the Government entered into a 

valid contract that put the risk of loss of the leased property on the Government itself. The 

Government cannot escape paying what it expressly agreed to pay if the unit were destroyed

under the Risk of Loss clause by asserting that the contract constructively ended with the 

destruction of the MRI unit. The parties’ contract did not leave room for this type of construct –

in the event the unit were destroyed, the lease agreement spelled out a continuing obligation 

which the government breached. 

Defendant also invokes the frustration of purpose doctrine to argue that the Government 

has no obligation to pay the remaining lease payments because the purpose of the contract was 

frustrated by the fire. Def.’s Post-Trial Br. 24. Defendant asserts that “[t]he accidental fire 

which destroyed the unit was beyond the contemplation of the parties at the time of contracting” 

and quotes the Restatement (Second) of Contracts:

Where, after a contract is made, a party’s principal purpose is substantially 

frustrated without his fault by the occurrence of an event the non-occurrence of 

which was a basic assumption on which the contract was made, his remaining 
15

duties to render performance are discharged, unless the language or the 

circumstances indicate the contrary.

Id. (citing Restatement (Second) of Contracts § 265 (Am. Law Inst. 1981) (emphasis added)). 

Here, the language of the contract did “indicate the contrary.” Id. A stated recognition of this 

contract was that the unit might be destroyed. The Risk of Loss clause expressly stated that the 

Government as lessee would bear the risk of loss for destruction of the unit and that such 

destruction would not relieve the Government of the obligation to make lease payments. The

frustration of purpose doctrine is clearly inapplicable here. 

Defendant further argues that Plaintiff’s damages must be reduced by lease payments it 

did not have to make after “buying out” the unit and any maintenance or operating costs it did 

not have to pay on the unit after the fire. Def.’s Post-Trial Br. 13-14; Def.’s Reply 9-11. As 

Defendant correctly asserts, “a breaching party [may seek] to offset an award of damages by 

proving that the non-breaching party has achieved some cost savings because the breach 

permitted it to avoid . . . some aspect of performance.” Energy Nw. v. United States, 641 F.3d 

1300, 1306 (Fed. Cir. 2011) (explaining Carolina Power & Light Co. v. United States, 573 F.3d 

1271, 1277 (Fed. Cir. 2009)). In Carolina Power, the Government successfully argued that its 

breach in failing to pick up spent nuclear fuel allowed the plaintiffs to avoid the costs of loading 

the spent nuclear fuel for shipment to a Government facility, a cost that they were required to 

cover under the parties’ contract. 573 F.3d at 1277. Here, Defendant’s failure to pay under the 

Risk of Loss clause did not, however, allow Plaintiff to avoid any aspect of its own performance. 

Tr. 288, 392-93. DMS’ asset manager, Ms. Hammes, testified that Plaintiff had to make lease 

payments to Bank One and buy the unit at the end of the lease regardless of the state of the unit. 

Id. at 392-93. DMS’ former senior Vice President, Mr. Axelrod, testified that he “assumed” that 

Plaintiff still had to pay service charges on the MRI unit after the fire because its service 

contract with Siemens would have continued even if the unit had been destroyed. Id. at 288-89. 

Finally, Defendant argues that Plaintiff is not entitled to the eight months of unpaid lease 

payments because it has not shown how much of each of the monthly payments would have been 

profit. Defendant’s suggestion that Plaintiff must prove what the individual components of each

$52,000 monthly lease payment were and justify that each element is a proper form of damages 

is incorrect. See Def.’s Reply 10-11. The parties agreed in a valid contract that Defendant 

would pay $52,000 per month to lease the MRI unit and that Defendant would be responsible for 

these payments if the unit were destroyed. DX 1.3, 1.13.

The Court awards Plaintiff eight months of unpaid lease payments as these damages were 

caused by the breach, were foreseeable, and have been calculated with reasonable certainty. 

The Court Awards Plaintiff Late Payment Fees Pursuant to the Contract

Plaintiff claims entitlement to a monthly 5% late fee and 1.5% service charge on the 

unpaid lease payments. Section 2.1 of the lease agreement’s terms and conditions stated:

Late Payment. A late charge of five percent (5%) of any payment not paid when 

due as compensation for Lessor’s internal operating expenses arising as a result of 

such delayed payment, plus a service charge of [1.5%] per month, not to exceed 

the maximum amount allowed by law, shall be made on any portion of the 
16

Lessee’s outstanding balance which is not paid when due whether such payments 

are due prior to or after a Default. The lease is a net lease and Lessee shall not be 

entitled to any abatement of, reduction of, or setoff against Lease Payments for 

any reason whatsoever. 

DX 1.12. Defendant did not pay lease payments for eight months when due, despite its 

obligation to continue making these payments under the Risk of Loss clause. See DX 1.13. 

Defendant invokes the Prompt Payment Act to argue that the Court should reject 

Plaintiff’s claim to late fees and service charges it characterizes as interest owing on the unpaid 

balance. Def.’s Post-Trial Br. 14, n. 3. Defendant asserts that Plaintiff “cannot receive [Prompt 

Payment Act] interest” here. Id. Defendant’s argument appears to be based on the notion that 

the Prompt Payment Act is the only way for a contractor to receive these types of payments from 

the Government and, as Plaintiff does not qualify for Prompt Payment Act interest, the contract’s 

late payment provision is not authorized by law. There is no provision of the Prompt Payment 

Act, however, that prevents commercial parties and the Government from separately agreeing via

contract for the payment of late fees, service fees, or interest. Here, Plaintiff does not claim

Prompt Payment Act interest but instead bases its claim for the late fee and service charge solely 

on the contract. 

“Under the long-standing ‘no-interest rule,’ sovereign immunity shields the U.S. 

government from interest charges for which it would otherwise be liable, unless it explicitly 

waives that immunity[.]” Sandstrom v. Principi, 358 F.3d 1376, 1379 (Fed. Cir. 2004). The nointerest rule is codified at 28 U.S.C. § 2516(a), which states:

Interest on a claim against the United States shall be allowed in a judgment of the 

United States Court of Federal Claims only under a contract or Act of Congress 

expressly providing for payment thereof.

28 U.S.C. § 2516(a) (2012). 

As the statue clearly states, the no-interest rule can be waived by “‘specific provision by 

contract or statute, or express consent by Congress.’” England v. Contel Advanced Sys., Inc., 

384 F.3d 1372, 1379 (Fed. Cir. 2004) (quoting Library of Congress v. Shaw, 478 U.S. 310, 317 

(1986) superseded by statute, Civil Rights Act of 1991, Pub. L. No. 102-166, 1-5 Stat. 1079 

(internal quotation and alterations omitted)). The no-interest rule does not act as an absolute bar 

for a plaintiff to receive interest. Rather, it is well established that interest can be awarded 

against the Government if a contract, treaty, or statute expressly provides for the interest 

payment so long as the provision is “affirmative, clear-cut, [and] unambiguous.” United States 

v. Thayer-West Point Hotel Co., 329 U.S. 585, 590 (1947). 

In the instant case, the contract expressly, affirmatively, and unambiguously requires the 

Government as lessee to pay a late fee and a service charge on unpaid amounts due. DX 1.12. 

The parties’ agreement is explicit on this point. Id. Thus, the parties’ contract for the lease of 

the MRI unit operates as a waiver of the Government’s sovereign immunity for the payment of 

these charges even if characterized as interest. The Court awards Plaintiff its late fees and 
17

service charges under this contract provision, in an amount to be determined in further 

proceedings.8

The Court Awards Plaintiff Attorney’s Fees Pursuant to the Contract

Plaintiff contends that it is entitled to attorney’s fees under the contract based on the Risk 

of Loss Clause and Paragraph 18 of the Terms and Conditions of the Asset Lease Agreement. 

The Risk of Loss Clause provides that the Government would be liable for “any other obligations 

under this lease” in the event the MRI unit were destroyed or damaged. PX E. Paragraph 18 of 

the Terms and Conditions sets forth a fee-shifting obligation, stating:

LESSOR shall be entitled to exercise all rights and remedies under law upon 

breach by Lessee of any terms or conditions herein. In the event that legal or 

other action is required to enforce Lessor’s rights hereunder, Lessee agrees to 

reimburse LESSOR on demand for its reasonable attorney’s fees and other related 

costs and expenses.

DX 1.14. 

Plaintiff posits that in signing the lease agreement, the VA expressly consented to be held 

to this fee-shifting provision in the event of breach. Defendant counters that this Court lacks the 

power to grant Plaintiff attorney’s fees under the lease agreement on two grounds. First, 

Defendant contends that the Tucker Act does not permit this Court to award attorney’s fees 

because they are unrelated to contract performance and the Government has not waived 

sovereign immunity for the fee-shifting terms. Def.’s Post-Trial Br. 14-15. Second, Defendant 

argues that because the Tucker Act does not waive sovereign immunity, the only means for 

Plaintiff to recover attorney fees is under the Equal Access to Justice Act (“EAJA”), 28 U.S.C. § 

2412. Defendant contends that DMS would not be an eligible prevailing party under EAJA 

because its net worth exceeds $2 million. Id. at 16-17. 

This Court May Award Attorney’s Fees Expressly Bargained for in a Binding Contract

Under well entrenched principles of sovereign immunity, the United States cannot be 

sued without its consent. The Government’s consent to be sued for contract damages under the 

Tucker Act forms the predicate for this Court’s jurisdiction. The Tucker Act provides:

 

8

In its Reply, Defendant asserts that the Court’s liability opinion limited Plaintiff’s 

recovery to the value of the MRI unit and the unpaid lease payments and that Plaintiff’s requests 

for late fees and attorney’s fees “fall outside of this Court’s limited charter.” Def.’s Reply 2-3. 

In the liability opinion, in the context of analyzing the broad indemnification clause, which 

purported to subject the Government to unlimited liability, the Court stated that Plaintiff had 

invoked the Risk of Loss clause, not the indemnification clause. The Court found that the Risk 

of Loss clause did not violate the Anti-Deficiency Act by subjecting the Government to 

unlimited liability, in that this clause limited Plaintiff’s damages to the value of the MRI unit and 

the unpaid lease payments. See DMS Imaging, 115 Fed. Cl. at 799. The Court in that context 

was not limiting the scope of the Risk of Loss clause or establishing a ceiling on Defendant’s 

potential liability and did not preclude Plaintiff from seeking additional damages in the form of 

late fees, service charges, attorney’s fees, and interest. Id.
18

The United States Court of Federal Claims shall have jurisdiction to render 

judgment upon any claim against the United States founded either upon the 

Constitution, or any Act of Congress or any regulation of an executive 

department, or upon any express or implied contract with the United States or for 

liquidated or unliquidated damages in cases not sounding in tort. 

28 U.S.C. § 1491(a)(1) (2012). 

The Tucker Act statutorily waives the Government’s sovereign immunity for a plaintiff’s 

substantive common law contract claims and claims under the Contract Disputes Act, 41 U.S.C. 

§ 7100 et seq. United States v. Mitchell, 463 U.S. 206, 212 (1983) (internal footnote omitted). 

The Government’s consent to be sued for attorney’s fees does not fall under the Tucker Act’s 

general waiver of sovereign immunity, but instead requires the Government to make a separate 

affirmative waiver. Library of Cong. v. Shaw, 478 U.S. at 314-15. This comports with the 

default “American Rule” that each litigant bear its own legal costs absent a statute or express 

contractual language to the contrary. E.g., Alyeska Pipeline Serv. Co. v. Wilderness Soc’y, 421 

U.S. 240, 247 (1975). Normally, this separate affirmative waiver for attorney’s fees comes in the 

form of a statute. See Franklin Fed. Sav. Bank v. United States, 55 Fed. Cl. 108, 123 (2003) 

(“The law is quite clear that statutory authorization is the sine qua non for recovery of legal costs 

arising from litigation against the Government.”). 

At issue here is whether an express fee-shifting term in a lease agreement, signed by the 

VA’s Contracting Officer, constitutes an affirmative waiver of sovereign immunity that subjects 

the Government to suit for reasonable attorney’s fees. The Court of Federal Claims considered 

an almost identical issue in International Industrial Park, Inc. v. United States, 102 Fed. Cl. 111, 

114 (2011), aff’d, 496 Fed. App’x. 85 (Fed. Cir. 2013). In Industrial Park, the Court awarded

attorney’s fees holding that an express fee-shifting term in a construction contract constituted an 

affirmative waiver of the Government’s sovereign immunity. 102 Fed. Cl. at 113. The feeshifting contract term in Industrial Park provided:

Attorney’s Fees. In the event of any litigation arising from or related to this 

[contract], the prevailing party shall be entitled to recover from the non-prevailing 

party all reasonable costs including attorney fees as provided by law.

Id.

The Industrial Park Court analogized the American Rule requiring litigants to bear their 

own costs to the no-interest statute that generally bars a party from obtaining awards of interest 

from the Government absent waiver. Id. at 114. (citing Library of Cong. v. Shaw, 478 U.S. at 

314. The Industrial Park Court relied upon Library of Congress v. Shaw, where the Supreme 

Court recognized that “[i]n creating the Court of Claims, Congress retained the Government’s 

immunity from awards of interest, permitting [the award of interest] only where expressly agreed 

to under contract or statute. Library of Cong. v. Shaw, 478 U.S. at 317 (citing 28 U.S.C. § 

2516(a)) (emphasis added). From this language, the Industrial Park Court reasoned that because 

Congress may “authorize interest awards by contract or statute, it similarly may authorize the 

award of attorneys’ fees by either medium.” 102 Fed. Cl. at 114. Thus, the Industrial Park Court 

held that the Government can affirmatively waive sovereign immunity with respect to attorney’s 

fees in Tucker Act cases either by statute or an express contractual provision. Id.; accord First 
19

Fed. Sav. & Loan Ass’n of Rochester, 88 Fed. Cl. 572, 583 (2009) (analogizing the American 

Rule to the no-interest rule, and awarding attorney’s fees based on a contract provision in a 

financing agreement executed by the Government that allowed the prevailing party in any legal 

action to recoup attorney’s fees); Applegate v. United States, 52 Fed. Cl. 751, 759 (2002) (stating 

“[i]f immunity for interest may be waived by contract, the same must hold true for attorney’s 

fees.”).

The Industrial Park Court further found that a contracting officer’s general authority to 

contract on behalf on an agency was sufficient to bind the Government to all of a contract’s 

terms – including attorney’s fees – and reasoned that the Government can overcome the 

American Rule through express contract terms when it “does business on business terms.” 102 

Fed. Cl. at 114 (quoting United States v. Nat’l Exch. Bank of Balt., Md., 270 U.S. 527, 534 

(1926)). As a 34-year veteran in the government contracts arena with the authority to sign 

contracts on behalf of the government up to $100 million, Contracting Officer Perales had the 

requisite authority to bind the Government to the contract. Tr. 32-33, 43.

Based on Library of Congress v. Shaw, it is settled that the Government can, with respect 

to attorney’s fees, like interest payments, waive sovereign immunity by entering into an 

enforceable contract with an express fee-shifting provision.9 Here, the contract expressly 

provided that upon breach the VA “agrees to reimburse [DMS] on demand for its reasonable

attorney’s fees.” DX 1.14. The Court accordingly finds that the Government affirmatively 

waived its sovereign immunity with respect to the payment of attorney fees by entering into the 

fee-shifting provision in the lease agreement. 

EAJA Does Not Preclude DMS from Recouping its Attorney’s Fees Under the Contract

Defendant argues that EAJA “defines the limits of the waiver of sovereign immunity for 

the payment of attorney’s fees by the United States” and “[a]bsent compliance with [the EAJA] 

requirements, the United States cannot be liable for the payment of attorney’s fees. Def.’s PostTrial Br. 16. As Plaintiff recognizes, EAJA does not limit an agency’s “ability to enter into a 

contract with a fee-shifting provision.” Pl.’s Post-Trial Br. 12. 

The Court addressed a similar argument in Industrial Park, where the plaintiff sought

attorney’s fees both under the terms of its contract with the Government and alternatively under 

EAJA. 102 Fed. Cl. at 113. Because the Industrial Park Court found that the plaintiff was 

entitled to attorney’s fees under the contract terms, the Court did not need to address the EAJA 

issue. Nor did EAJA prevent the Industrial Park Court from awarding attorney’s fees under the 

contract’s terms. Id. at 113-14. Here, as in Industrial Park, DMS is only seeking attorney’s fees 

under a contract that expressly provides for such fees and EAJA does not preclude a fee award. 

Id.

 

9 Defendant relies on three cases for its proposition that the Tucker Act does not permit an 

agency to contract for payment of attorney’s fees, Kania v. United States, 650 F.2d 264 (Ct. Cl. 

1981), Kurz & Root Co. v. United States, 652 F.2d 69 227 (Ct. Cl. 1981), and S.W. Aircraft, Inc. 

v. United States, 551 F.2d 1208, 1211 (Ct. Cl 1977). The Court finds these cases wholly 

inapposite.
20

Plaintiff May be Entitled to CDA Interest

The Court does not on the current record determine what, if any, CDA interest under 41 

U.S.C. § 7109(a)(1) is appropriate. While it would be “inequitable to permit the government to 

have the benefit of the wrongfully withheld sums without accrual of interest,” it is settled that the

CDA “does not authorize payment of interest on interest liability.” See Stone Forest Indus., Inc. 

v. United States, 973 F.2d 1548, 1553-54 (Fed. Cir. 1992). In Stone, the Federal Circuit reversed 

a trial court’s award of CDA interest on accrued interest for refund payments from a breach of 

contract action for purchasing timber. Id. The Stone court reasoned that it was bound by the 

Court of Claims precedent in ACS Construction Co. v. United States, which held that CDA did 

not expressly authorize interest on accrued interest liability and, therefore, the Government has 

not waived sovereign immunity for an award of interest on interest liability. Id. (citing ACS 

Constr. Co., 230 Ct. Cl. 845, 846 (1982)). As such, the Court must on further proceedings

determine whether any components of Plaintiff’s contract damages are properly characterized as 

interest.

Conclusion

Plaintiff has demonstrated entitlement to damages in the amount of $907,209.33, plus 

reasonable attorney’s fees, litigation costs, late fees, services fees, and recoverable CDA interest 

in an amount to be determined. 

Plaintiff shall file a motion for reasonable attorney’s fees, litigation costs, late fees,

service charges, and interest pursuant to the contract, and CDA interest by December 11, 2015. 

Defendant shall respond by January 11, 2016, and Plaintiff shall reply by January 26, 2016.

s/Mary Ellen Coster Williams

MARY ELLEN COSTER WILLIAMS

Judge