Just Trust Me on This: Allegation of Contract’s Existence Is Sufficient to Establish Jurisdiction Under Contract Disputes Act

The U.S. Court of Appeals for the Federal Circuit held in Avue Technologies Corp. v. Department of Health and Human Services that an appellant’s non-frivolous allegation of a contract with the government via an end-user license agreement (EULA) incorporated into another contractor’s Federal Supply Schedule (FSS) agreement was sufficient to establish jurisdiction under the Contract Disputes Act (CDA).

The Federal Circuit addressed a situation in which the Food and Drug Administration (FDA) purchased a software license from an authorized reseller of Avue’s products through a task order issued under a General Services Administration (GSA) FSS contract. The task order and contract incorporated an undated and unsigned version of Avue’s EULA. After the task order expired, Avue alleged that the FDA was misappropriating data in violation of the EULA terms and conditions, Avue’s intellectual property rights, and the Trade Secrets Act. Avue submitted a claim to the FDA, but the contracting officer instructed Avue that it would need to have the reseller submit a pass-through claim on Avue’s behalf. Avue appealed to the Civilian Board of Contract Appeals on a deemed-denial basis.

At the Board, the government initially moved to dismiss the appeal for lack of jurisdiction on the basis that Avue was not a “contractor” within the meaning of the CDA. The Board initially denied the motion but later sua sponte ordered the parties to file supplemental briefs addressing whether a software license is a procurement contract. As discussed in a previous alert, the Board then dismissed the appeal on the basis that the EULA was not a procurement contract within the meaning of the CDA.

The Federal Circuit reversed the Board’s decision. Relying on its precedent in Engage Learning, Inc. v. Salazar, 660 F.3d 1346 (Fed. Cir. 2011), the Federal Circuit explained that, to establish jurisdiction under the CDA, a plaintiff needs only to allege the existence of an express or implied contract with the Government. The appellant’s obligation to prove the existence of an enforceable contract must be resolved as a decision on the merits. Because Avue alleged that it was a party to the FSS contract and the FDA task order by virtue of each incorporating the EULA, the Board had jurisdiction to hear the appeal.

On remand, the Board still must consider whether Avue was a party to the FSS contract and FDA task order, or otherwise has enforceable rights through the agreements. For now, this case stands as a notable reminder of the complexities potentially associated with EULAs incorporated into third-party contracts.