Court Opinion

ID: 9478159
Source: CourtListenerOpinion
Date Created: 2023-08-05 06:42:08.589265+00
Date Added: 2024-06-11T17:46:16.915945
License: Public Domain

REINHARDT, Circuit Judge,
concurring:
I concur in the majority’s opinion. I write separately, however, in order to clarify the basis for my concurrence in section A, the part of the opinion that discusses the disputes clause.
Notwithstanding the broad language of the standard disputes clause,1 that clause, unlike the typical arbitration clause, has consistently been interpreted in a very narrow manner. It is not possible to understand the workings of the disputes clause without referring to other provisions of the contract. In addition to the disputes clause, government contracts often contain substantive clauses which set forth specified remedies and procedures governing particular claims that may be made by the contracting parties. For example, a substantive clause may provide for increasing both time and compensation if a construction contractor encounters subsurface conditions materially different from those contained in the specifications, United States v. Utah Construction and Mining Co., 384 U.S. 394, 397 n. 1, 86 S.Ct. 1545, 1547 n. 1, 16 L.Ed.2d 642 (1966), or may authorize the collection of liquidated damages if a party fails to purchase the goods it contracted for, United States v. Reisman, 611 F.2d 325, 327 n. 1 (9th Cir.1980). Substantive clauses often provide means for modifying the terms of the contract when problems arise, thus avoiding the necessity of damage actions. The disputes clause requires that disagreements covered by those substantive clauses be presented to the contracting officer, and then, if necessary, appealed to a higher official, here the Secretary of the Navy.
When a contracting party’s claim and the remedy it seeks are both covered by a substantive clause, the cases are clear: the party must exhaust the remedies set forth in the disputes clause before filing a suit. See, e.g., Crown Coat Front Co. v. United States, 386 U.S. 503, 505-06, 511-14, 87 S.Ct. 1177, 1178-79, 1181-83, 18 L.Ed.2d 256 (1967). The cases are equally clear that when no substantive clause provides for how an alleged error, omission or breach is to be handled the disputes clause is not applicable and the claim can be brought directly to the district court. See, e.g., Utah Construction, 384 U.S. at 403-18, 86 S.Ct. at 1550-58; Kyle Engineering v. Kleppe, 600 F.2d 226, 230-31 (9th Cir.1979).
The question the cases do not squarely answer is whether a party must exhaust its remedies under the disputes clause if its claim is covered by a substantive clause but the remedy the party seeks is not — for example, where the contract offers only adjustment in payment as a remedy for government delay, but the party argues that the delay was so severe that the appropriate remedy is rescission or termination. Cf. Reisman, 611 F.2d at 329 (disputes act should not be interpreted to require “a useless resort to administrative remedies”). Similarly, while it is more than plausible to suggest that the disputes clause covers only disputes that are a part of an “ongoing contractual relationship”, maj. op. at 583, the law on this point is not entirely clear. See Kyle, 600 F.2d at 231 n. 4 (stating, in dictum, that the issue of termination would be subject to the disputes clause). However, in the present case, we need not reach either of those questions. Here, Triple A’s contract does not contain a clause establishing procedures or remedies governing the kind of claim that Triple A has brought. Thus the parties’ disagreement falls squarely within the rule set forth in Utah Construction and Kyle, and the disputes clause is not applicable. The district court was correct *587in its decision to retain jurisdiction over the Government’s suit.

. See, e.g., United. States v. Reisman, 611 F.2d at 327 n. 2 ("Except as otherwise provided in this contract, any dispute concerning a question of fact under this contract ...”).