Owner of Closely-held Contractor Has No Privity Of Contract With Govt, Fed. Circ. 2015-5091, Dourandish v. U.S.
The Federal Circuit upheld the dismissal of a lawsuit over unpaid executive compensation costs on an Air Force research contract, rejecting the company owner’s arguments that he was should have standing to sue as a beneficiary of the contract or as a stand-in for the company.
Robert Dourandish, co-owner and executive officer of a company called Quimba, had sued to recover deferred compensation costs rejected by the Defense Contract Audit Agency under Quimba’s cost-plus fixed-fee contract with the Air Force Research Laboratory, and appealed after the Court of Federal Claims dismissed his suit. Quimba is separately suing over the disallowed costs, and its lawsuit remains pending in the Court, according to the Federal Circuit decision.
The Federal Circuit upheld the court’s decision to dismiss Dourandish’s case, finding that he had not establish standing under any of the legal theories presented in his appeal. Dourandish had argued that he was an intended third-party beneficiary of the contract between Quimba and the Air Force Research Laboratory, that he was the real party in interest in the contract, that he had standing as a subcontractor of Quimba, and that he had standing as a creditor beneficiary.
Dourandish had also cited the recent Supreme Court decision in v. Hobby Lobby Stores Inc. to make the case that he could sue based on Quimba’s contract with the government “because Quimba is a closely held corporation and, as one of its coowners, his interest overlap significantly with those of the company,” according to the decision. But the Circuit held that Dourandish misread the Hobby Lobby decision, which has “no bearing on whether the co-owner of a closely held corporation has standing to sue on the corporation’s contracts.”
Dourandish represented himself. The government is represented by Paul D. Oliver of the U.S. Department of Justice.