Agency Said Contractor Misrepresented Which Entity Survived a Merger. Did the Misrepresentation Invalidate Assignment of the Contract?

While performing, a contractor merged with another company. The new, merged entity took over performance and appealed a claim to the CBCA. The agency moved to dismiss, arguing the new contractor had misrepresented itself as the old contractor, and that this misrepresentation precluded the merger from the Anti-Assignment Act’s “operation of law” exemption. Thus, the agency reasoned, the contract was never assigned, so the new contractor was not in privity with the government. The CBCA, however, found the alleged misrepresentation didn’t impact the board’s jurisdiction. Regardless of the misrepresentation, a valid merger occurred. The contract was assigned to the new entity, which was in privity with the government.

ATS Trans LLC dba Around the Sound/Transpro v. Department of Veterans Affairs CBCA 7163

Background

In 2014, the Department of Veterans Affairs entered a contract with Transpro, Inc. to provide transportation services for disabled veterans. In 2015, TransPro merged with another company, ATS Trans LLC. Under the merger agreement, ATS was the surviving organization; TransPro ceased to exist.

ATS had informed the VA of the merger, and the invoices ATS submitted after the merger were submitted in the name of ATS. But all of the contract modifications after the merger still named TranPro as the contractor. 

In 2021, ATS submitted a claim for a constructive change. The VA denied the claim. ATS appealed to the CBCA. The VA moved to dismiss the appeal for lack of jurisdiction. The VA argued that the assignment of the contract from TransPro to ATS was invalid. Thus, ATS was not in privity with the government and could not maintain an appeal before the board.

Analysis

The Anti-Assignment Act prohibits the assignment of a government contract or claim. The Act, however, lists exceptions to the prohibition. One of these exceptions is for assignments occurring by the operation of law—that is, corporate restructuring, mergres, name changes etc.

The VA argued the operation of law exception did not apply because ATS had misrepresented or failed to disclose the merger in a timely manner. Because the exception didn’t apply, the government reasoned, the contract had never been assigned. 

The board rejected the VA’s argument. Courts have repeatedly held that mergers fall outside of the Anti-Assignment Act. Here, there was a valid merger of TransPro and ATS such that by operation of law, TransPro’s contract was assigned to ATS. Even if ATS had misrepresented itself as TransPro, it would not change the fact that the ATS was entitled by operation of law to perform the contract.

ATS is represented by Howard W. Roth, III and Jedidiah K. Blake of Oles Morrison Rinker & Baker, LLP. The government is represented by David G. Fagan of the Department of Veterans Affairs.

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