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Right of First Refusal: Smith Pachter McWhorter Successfully Represents Contractor in Breach of Contract Claim.

In 2011, the United States Army (the “Government”) awarded a contract to Aegis Defense Services, LLC (“Aegis”) for mobile security and staffing services in Iraq.  Under a task order for the provision of armed protection services to military and civilian personnel, the Government was to provide Aegis with Light Armored Vehicles (“LAVs”).  However, in order to lawfully operate the vehicles in Iraq, Aegis needed to hold title to the LAVs.  The Government was unable to provide the LAVs and agreed that Aegis could procure the LAVs on the Government’s behalf.  The Government accepted Aegis’ proposal to procure the vehicles and executed a contract modification stipulating that, at the end of the contract, if the Government did “not wish to take title to the vehicles, contractor will be given the right of first refusal on negotiating and possible procurement of said vehicles.”  At the end of the contract, the Government donated the LAVs to the Iraqi government without offering to resell the vehicles to Aegis.  Aegis submitted a non-monetary claim seeking interpretation of the contract terms regarding the right of first refusal and certified monetary claims for breaches of the right of first refusal.  The Armed Services Board of Contract Appeals (the “ASBCA”) consolidated the appeals and held a hearing on entitlement on January 18, 2017.  Smith Pachter McWhorter attorneys Armani VadieeAshley Amen, and Kristin Tisdelle represented Aegis before the ASBCA. 

In a decision  dated November 15, 2017, the ASBCA found for Aegis, sustaining the appeal.  The ASBCA ruled that the Government violated the terms of the contract by failing to offer Aegis a right of first refusal before disposing of the LAVs.  The Government argued that selling the LAVs to Aegis would run afoul of the United States Department of Commerce’s arms export regulations and rules governing the demilitarization and withdrawal of United States forces from Iraq.  The ASBCA found that these constraints did not relieve the Government of its obligation to comply with the express terms of the contract.  Additional reporting on the decision is available here.