Opinion ID: 2357566
Heading Depth: 1
Heading Rank: 4

Heading: Open-ended Indemnification Clauses Violate the Anti-Deficiency Act

Text: At first blush, it might appear that summary judgment was premature. Congress appropriated $40 million for expenses that were necessary to complete the redevelopment of Union Station. Pub.L. No. 97-125, § 118(a), 95 Stat. at 1672 (The amount of such apportionment necessary to complete such project, not to exceed $40,000,000, shall remain available to the District of Columbia until expended. . . .) It seems plausible that at least some of the expenses claimed by INA were covered by the appropriation-that is, that they were necessary to complete the Union Station project. Moreover, the record before us does not establish that the entire appropriation has been spent. Perhaps it is a disputed issue of material fact whether the amounts claimed by INA are covered by the appropriation, [3] and whether the funds obligated by the District exceed the amount appropriated. See Union Pacific R.R. Corp. v. United States, 52 Fed.Cl. 730, 733 (2002) (court could not state as a matter of law what obligations are necessary expenses of property management). However, these arguments are foreclosed by the principle previewed above-that open-ended indemnity clauses violate the ADA. See Rick's Mushroom Service, Inc. v. United States, 521 F.3d 1338, 1346 (Fed.Cir.2008) (As recognized by the Court of Federal Claims, . . . the contracting officer had no authority to enter into an open-ended indemnity agreement. . . .); E.I. Du Pont de Nemours & Co., Inc. v. United States, 365 F.3d 1367, 1374 (Fed.Cir.2004) (We do not question the trial court's reasoning, . . . [that] the ADA . . . bars the enforcement of express open-ended indemnification clauses.). Such clauses violate the ADA because [t]here is no possible way to know at the time the contract is signed whether there are sufficient funds in the appropriation to cover the liability if or when it arises because no one knows in advance how much the liability may be. In re Assumption by Government of Contractor Liability to Third Persons  Reconsideration, 62 Comp. Gen. at 366. [4] As the trial court recognized, the clause at issue here was indeed open-ended-[t]he agreement contained no explicit, or even implicit, statement of a maximum liability, and it included no attempt to limit the District's liability to the amount remaining in the initial appropriation at the time the agreement was reached.