Court Rejects Indefinite Suspensions of Government Contractors Based on Guilt By Association

The United States District Court for the Northern District of Alabama recently held that the government cannot continue the suspension of a government contractor where the government does not initiate legal proceedings against the contractor within 18 months.

In Agility Defense and Government Services, Inc., et al. v U.S. Dept. of Defense, et al. DOD suspended Agility International and Agility Defense and Government Services for no reason other than that they were affiliated with Public Warehousing Company, a Kuwaiti corporation. The court noted that while the government has the right to suspend a contractor and its affiliates for up to 18 months without taking legal action against the contractor, it is not appropriate for the government to continue the suspension indefinitely. Here, while the government ultimately issued an indictment against the Kuwaiti parent, it suspended Agility International and Agility Defense and Government Services for more than three years without ever issuing an indictment against them.

Court Orders Summary Judgment for Agility

Agility sued the government seeking a determination that Agility should have been removed from the Excluded Parties’ List because the government had not taken any formal action against it within the 18-month period. The government countered that its indictment of the parent corporation allowed Agility’s suspension to continue indefinitely. The court disagreed with the government and entered summary judgment in favor of Agility, finding that that the 18-month limitation applied separately to each suspended contractor and not to all on the basis of an indictment against one.

Court Denies Government Request for Reconsideration

The government sought reconsideration of the court’s order, arguing that the Court failed to afford to the suspending agency appropriate deference. The government’s position was, essentially, that all of the procuring agencies bound by the FAR had adopted and applied the interpretation that it urged the court to adopt. The court denied the request for reconsideration and upheld its prior ruling in favor of Agility.

Lessons Learned: Contractors Must Be Diligent to Enforce Their Rights.

Agility, which was represented by Maynard Nexsen attorneys, serves as a reminder that the government’s rights are not unfettered in suspension and debarment cases. Contractors facing suspensions and debarment need to review the FAR carefully and quickly exercise their opportunity to respond, whether themselves or through representatives. Contractors must be diligent in ensuring that the government follows the regulation and does not continue a suspension beyond the time permitted by law.


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