Gordon Rees Scully Mansukhani presents the latest insights from our Government Contracts group, offering a comprehensive overview of recent significant decisions, regulatory changes, and essential updates for businesses contracting with federal and state governments. Our team compiled the most pertinent legal developments to keep you informed in the dynamic landscape of government contracts.
Tune in to The Essential GovCon Brief podcast for an in-depth discussion of the issues highlighted here.
Recent Cases/Decisions:
SCOTUS Affirms Federal District Court Injunction on Foreign Aid Effecting Payments to USAID Contractors
District Court Decision: Temporary Restraining Order Granted
On February 13, 2025, the U.S. District Court for the District of Columbia issued a temporary restraining order (TRO), barring the U.S. Department of State and the U.S. Agency for International Development (USAID) from suspending, pausing, or otherwise preventing the obligation or disbursement of foreign assistance funds that had been previously appropriated by Congress. The court found that the plaintiffs, a coalition of businesses and nonprofit organizations, were likely to succeed on their claim that the blanket suspension of funds violated the Administrative Procedure Act (APA) by failing to consider the reliance interests of affected entities. The court also determined that the plaintiffs demonstrated irreparable harm, as organizations reliant on these funds were forced to downsize operations, lay off staff, and halt critical foreign aid programs.
While the TRO prohibited the executive branch from enforcing the funding suspension, it clarified that agencies could still act on agreements based on lawful statutory or contractual authority, provided such actions were not merely pretextual efforts to bypass the court’s order.
Supreme Court Review: Denial of Government’s Application to Vacate Order
Following the district court’s ruling, the government sought to vacate an additional February 25, 2025, enforcement order, which required the immediate disbursement of approximately $2 billion for completed work prior to the TRO. The U.S. Supreme Court, in Department of State v. AIDS Vaccine Advocacy Coalition, denied the government’s application and lifted an administrative stay initially imposed by the chief justice.
The Supreme Court’s order emphasized that the district court retained jurisdiction to ensure compliance with the TRO but noted that it should clarify the feasibility of compliance timelines. The denial of the government’s application effectively upheld the district court’s decision requiring prompt disbursement of withheld funds.
SCOTUS Dissenting Opinion: Sovereign Immunity and Judicial Overreach
A dissenting opinion, authored by Justice Alito and joined by Justices Thomas, Gorsuch, and Kavanaugh, argued that the district court overstepped its jurisdiction by compelling the federal government to make payments that could not be easily recovered. The dissenters contended that the ruling disregarded sovereign immunity, which generally protects the government from monetary claims unless explicitly waived. They also criticized the district court’s treatment of the enforcement order as a non-appealable TRO, asserting that the payment mandate functioned as a preliminary injunction rather than a temporary measure.
Citations:
AIDS Vaccine Advoc. Coal. v. United States Dep’t of State, No. CV 25-00400, 2025 WL 485324 (D.D.C. Feb. 13, 2025)
Dep’t of State v. AIDS Vaccine Advoc. Coal., No. 24A831, 2025 WL 698083 (U.S. Mar. 5, 2025)
U.S. District Court for Maryland Blocks Executive Order Restricting DEI Programs in Federal Contracts and Grants
Overview: The National Association of Diversity Officers in Higher Education and other plaintiffs challenged executive orders issued by President Trump that sought to terminate “equity-related” federal contracts and grants, enforce new DEI certification requirements, and implement enforcement measures against DEI programs in the private sector. The plaintiffs alleged that these provisions were unconstitutional under the Spending Clause, the First and Fifth Amendments, and the principle of separation of powers. The court granted a preliminary injunction, finding that the challenged provisions were unconstitutionally vague and imposed impermissible restrictions on speech.
Allegations:
- The executive orders unlawfully terminated “equity-related” federal grants and contracts without clear statutory authority, violating the Spending Clause.
- The requirement for federal contractors and grant recipients to certify that they do not engage in DEI programs violating anti-discrimination laws was vague and chilled free speech.
- The provision directing the Attorney General to enforce civil compliance investigations against entities engaging in “illegal DEI” practices constituted unconstitutional viewpoint discrimination.
- The orders were impermissibly vague, failing to define terms like “DEI,” “illegal preferences,” or “equity-related,” creating uncertainty for federal contractors and educational institutions.
- The provisions unlawfully expanded executive power without congressional authorization, violating the separation of powers.
Issues Considered:
- Spending Clause Violation: Whether the President has the unilateral authority to terminate federal funding for DEI-related programs.
- First Amendment Violations: Whether the certification and enforcement provisions unlawfully restricted speech by deterring DEI-related advocacy.
- Vagueness Doctrine: Whether the challenged provisions were impermissibly vague, leaving affected parties uncertain about compliance.
- Separation of Powers: Whether the executive orders unlawfully infringed on congressional authority over federal spending and grant conditions.
- Irreparable Harm and Injunctive Relief: Whether plaintiffs demonstrated an imminent and substantial risk of harm justifying preliminary relief.
Key Court Findings:
- General Holding: The challenged provisions of the executive orders—specifically, the Termination Provision, Certification Provision, and Enforcement Threat Provision—were likely unconstitutional and unenforceable.
- Unconstitutional Vagueness: The court held that the lack of clear definitions in the executive orders left regulated entities unable to determine compliance, violating due process.
- Viewpoint Discrimination: The Certification and Enforcement Threat Provisions targeted specific viewpoints on DEI, constituting unconstitutional restrictions on speech.
- Separation of Powers Violation: The President lacked the authority to unilaterally terminate federal funding for DEI-related grants and contracts without congressional approval.
- Preliminary Injunction Granted: The court found the plaintiffs were likely to succeed on the merits and faced irreparable harm, justifying an injunction against the Termination, Certification, and Enforcement Threat Provisions.
Citation: Nat’l Ass’n of Diversity Officers in Higher Educ. v. Trump, No. 1:25-CV-00333-ABA, 2025 WL 573764 (D. Md. Feb. 21, 2025).
U.S. Court of Federal Claims Confirms Jurisdiction over OTA Bid Protests
Overview: Raytheon Company challenged the U.S. Department of Defense (DOD) Missile Defense Agency’s (MDA) decision to discontinue Raytheon’s participation in the Glide Phase Interceptor (GPI) program and proceed with Northrop Grumman under an Other Transaction Agreement (OTA). The primary dispute concerned whether the Court of Federal Claims (COFC) had jurisdiction to review OTA-related bid protests under the Tucker Act. The court denied the government’s motion to dismiss, holding that the COFC has jurisdiction over bid protests involving OTAs awarded under 10 U.S.C. §§ 4021–4022.
Allegations:
- Raytheon alleged that the MDA improperly evaluated proposals using unstated selection criteria, such as favoring Northrop Grumman’s “payload defeat” approach over Raytheon’s “aeroshell breakup” method.
- The MDA allegedly engaged in unequal treatment by considering the cost risks of Raytheon’s proposal but not applying the same scrutiny to Northrop Grumman.
- The government’s decision to discontinue Raytheon’s participation was allegedly influenced by Japan’s expressed preference for Northrop Grumman’s design, raising concerns about improper external influence.
- Raytheon asserted that MDA officials breached an implied-in-fact contract by failing to fairly and honestly consider Raytheon’s proposal.
Issues Considered:
- Bid Protest Jurisdiction: Whether COFC has jurisdiction to review bid protests related to OTAs under 10 U.S.C. §§ 4021–4022.
- Tucker Act Scope: Whether OTAs qualify as a “procurement” or are otherwise covered under the Administrative Dispute Resolution Act (ADRA).
- Unstated Evaluation Criteria: Whether the MDA’s preference for payload defeat over aeroshell breakup was an improper unstated selection criterion.
- Unequal Treatment: Whether the MDA unfairly scrutinized Raytheon’s cost risks while allowing Northrop Grumman’s design to proceed with less review.
- Implied-in-Fact Contract: Whether the government violated a duty to fairly consider all proposals, as required under procurement law principles.
Key Court Findings:
- General Holding: The government’s motion to dismiss was denied, affirming that the COFC has jurisdiction over bid protests involving OTAs and that Raytheon’s claims could proceed.
- COFC Jurisdiction Over OTAs: The court held that OTAs are within the COFC’s bid protest jurisdiction under the Tucker Act (28 U.S.C. § 1491(b)(1)), rejecting the government’s argument that OTAs evade judicial review.
- Procurement-Like Nature of OTAs: Although OTAs are not traditional procurement contracts, the court found that they involve procurement-like activities and thus fall under the COFC’s jurisdiction.
- Use of Unstated Evaluation Criteria: The MDA’s preference for Northrop Grumman’s payload defeat method was not disclosed in the solicitation, raising concerns about procedural fairness.
- Equal Treatment of Bidders: The court expressed skepticism about the disparate treatment of cost risks, suggesting that Raytheon may have been unfairly disadvantaged.
Citation: Raytheon Co. v. United States, No. 24-1824C, 2025 WL 583350 (Fed. Cl. Feb. 24, 2025)
U.S. District Court Allows Trade Secrets Case against CivitasDX to Proceed
Date: February 9, 2025
Overview: Trilogy Federal, LLC, a veteran-owned small business specializing in financial management systems for the U.S. Department of Veterans Affairs (VA), sued CivitasDX LLC and several related defendants for misappropriation of trade secrets, breach of contract, and tortious interference with its business relationships. Trilogy alleged that confidential strategies and proprietary information from its 2016 proposal were wrongfully used by CivitasDX in a successful bid for a 2021 VA contract. The court partially granted and partially denied the defendants’ motion to dismiss, allowing the trade secrets claims to proceed while dismissing the tortious interference claims without prejudice.
Allegations:
- Trade Secret Misappropriation: Trilogy claimed that its proprietary methodologies for financial system management were improperly obtained and used by CivitasDX and its partners to win a 2021 VA contract.
- Breach of Contract: A former Trilogy employee allegedly violated confidentiality agreements by sharing trade secrets with CivitasDX.
- Tortious Interference with Contract: CivitasDX and other defendants allegedly induced the employee to breach her confidentiality obligations.
- Tortious Interference with Prospective Business Relationship: Defendants’ use of Trilogy’s confidential information allegedly deprived Trilogy of future contracting opportunities with the VA.
Issues Considered:
- Existence of Trade Secrets: Whether the proprietary financial system strategies described in Trilogy’s 2016 proposal qualify as protected trade secrets under the Defend Trade Secrets Act (DTSA) and D.C. Uniform Trade Secrets Act (DCUTSA).
- Misappropriation Allegations: Whether the defendants unlawfully obtained and used Trilogy’s confidential information.
- Confidentiality Measures: Whether Trilogy took reasonable steps to maintain the secrecy of its trade secrets.
- Causation in Tortious Interference Claims: Whether the alleged misappropriation directly caused Trilogy to lose the 2021 VA contract and future business opportunities.
- Defendants’ Motion to Dismiss: Whether Trilogy’s allegations were legally sufficient to survive dismissal at this stage.
Key Court Findings:
- General Holding: The court denied dismissal of the trade secrets and breach of contract claims but granted dismissal of the tortious interference claims without prejudice.
- Trade Secrets Claims Survive: The court found that Trilogy sufficiently alleged the existence of trade secrets and their misappropriation, allowing these claims to proceed.
- Tortious Interference Claims Dismissed: The court ruled that Trilogy failed to adequately allege causation and damages for its tortious interference claims but dismissed them without prejudice, allowing Trilogy to refile with additional evidence.
- Breach of Contract Claims Remain: The court held that Trilogy plausibly alleged that the employee violated her confidentiality obligations by sharing trade secrets.
Citation: Trilogy Fed., LLC v. CivitasDX LLC, No. 24-CV-2713 (BAH), 2025 WL 436850 (D.D.C. Feb. 9, 2025).
GRSM Government Contracts Practice Group
GRSM’s Government Contracts team has considerable experience defending and enforcing the rights of our contractor clients in disputes against government entities and private businesses. In addition to litigating claims in state and federal courts, we routinely handle matters before administrative tribunals, such as the Government Accountability Office, the Small Business Administration, and the Armed Services Board of Contract Appeals.
Our team of attorneys is located throughout the United States, which allows the firm to represent contractors, regardless of size, and in a wide variety of industries, including defense, information technology, construction, and aerospace, among others.
GRSM would like to acknowledge the significant contributions to this update by Quyen Dang. Please contact Patrick Burns, Meredith Thielbahr, or Laegan Meyers for further information or with any questions.