Background
The Air Force awarded Telos a delivery order for UiPath software licenses, with a four-month base period and three option periods. Telos alleged that the order required the Air Force to exercise the options if sufficient funds were appropriated. After the Air Force declined to exercise the first option, Telos submitted a certified claim seeking payment associated with the option periods.
Telos had arranged financing tied to the delivery-order payments. It assigned payment rights to Wilmington Trust and, separately, to ePlus; ePlus later assigned rights in the payments to Bank Financial, N.A. (BFNA). Telos brought the CDA action as a purported pass-through claim for BFNA. The government moved to dismiss, arguing that the assignments violated the Anti-Assignment Act and that the alleged obligation to exercise options conflicted with the Anti-Deficiency Act.
The Court’s Holding
The Court of Federal Claims granted the government’s Rule 12(b)(1) motion and dismissed for lack of subject-matter jurisdiction. Telos’s assignment to ePlus and ePlus’s subsequent assignment to BFNA violated 41 U.S.C. § 6305 because neither assignee gave the required written notice to the government, and the arrangement also violated the statute’s single-assignment requirement.
Those invalid assignments annulled the delivery order as against the government, so the order could not support Telos’s claim. Alternatively, if the ePlus and BFNA transactions were merely agreements to remit funds rather than assignments, Telos lacked standing: BFNA was not alleged to be a subcontractor eligible for a sponsored claim, and Telos had not shown an injury of its own. The court did not reach the Anti-Deficiency Act argument or the merits of Telos’s contract theories.
Key Takeaways
- Assignments of government-contract payments must strictly satisfy the Anti-Assignment Act’s notice requirements.
- A contractor cannot make multiple or unauthorized further assignments of contract-payment rights and retain a viable CDA claim.
- Calling a claim a pass-through claim does not establish standing where the beneficiary is not a subcontractor and the prime contractor has no injury.
Why It Matters
The decision underscores that financing structures involving federal contract receivables must be carefully aligned with the Anti-Assignment Act. Failure to comply can do more than affect payment rights: it can annul the contract as to the United States and eliminate the basis for a CDA action.