COFC Holds that USAID Contractors Properly Pleaded Breach of Contract by Improper Mass Termination in Bad Faith/Abuse of Discretion

In Danziger et al. v. U.S., No. 25-cv-1241 (Fed. Cl. Apr. 10, 2026) (a Crowell & Moring case), the Court of Federal Claims (COFC) denied the government’s motion to dismiss a complaint seeking breach of contract damages for improper terminations in bad faith and/or abuse of discretion. The case involves hundreds of contractors for the U.S. Agency for International Development (USAID), who were terminated in 2025 in connection with the dismantling of USAID. The government sought to dismiss the case for failure to state a claim, arguing that the complaint failed to sufficiently plead bad faith or abuse of discretion. The court rejected these arguments, noting that the complaint was “replete with allegations implicating bad faith,” and specifically rejected the “peculiar notion” “that governmental misconduct is immunized when a contracting officer acts pursuant to directives from higher-ranking officials.” The court also held that the government’s payment of certain termination costs was no defense to the contractors’ breach claim and confirmed that an improper termination for convenience entitles contractors to termination costs as well as breach damages.