User:Mponce22/Severin doctrine

= Severin Doctrine = The Severin Doctrine is a doctrine that states that a general contractor must have a financial obligation to a subcontractor to be able to sue the United States Government for any losses suffered by a subcontractor. Absent this requirement, the general contractor cannot sue the United States Government on behalf of one of its subcontractors to recover losses. This doctrine found its origins in the case Severin v. United States, 99 Ct.Cl. 435 (1943).

Background
In Severin v. United States, the plaintiffs, Nils P. Severin and Alfred N. Severin, were co-partners of the N. P. Severin Company. On August 3, 1932, the plaintiffs entered a contract with the United States Government to construct a Post Office in Rochester, New York. The project was to be completed within 540 days of receiving the duty to proceed for a consideration of $805,923. The notice to proceed was received by the plaintiffs on September 2, 1932 and the project was due for completion by February 24, 1934.

For this project, the plaintiff hired a subcontractor to oversee the production of marble caps and ornamental work. In addition to the plaintiffs, the United States Government employed a firm of architects in charge of approving plaster models and ornamental work for the project. The United States Government was unable to supply the plaintiffs with these appropriate models for the project on time, resulting in a delay in the work of the plaintiff and their subcontractor.

Eventually, the project was completed on March 28, 1934. The lack of appropriate models caused a thirteen-day delay in the subcontractors work production, leading to $702 in monetary damages relating to costs associated with labor and rental equipment. Additionally, the subcontractor had an overhead expense of $35 and the plaintiff had an overhead expense of $73.71.

Holding
The plaintiffs then filed a lawsuit for damages sustained from the Government’s breach of contract, as well as the damages sustained by the subcontractor. The Court held that the plaintiffs could recover their damages for N. P. Severin Company, because they had a contract with the government that was breached. However, the Court held that the losses of the subcontractor could not be recovered. It was determined that the subcontractor could not sue the Government because it did not have a contract with them and therefore, the Government was not liable to the subcontractor. Because the Government did not have a contract with the subcontractor, it did not give its consent to be sued for a breach.

The Court also held that a subcontractor was only able to file a claim under the contractor's name if the contractor had suffered actual damages. In order to achieve this, the plaintiffs have the burden of proving that they suffered actual damages, as opposed to a subcontractor. If the plaintiffs are able to demonstrate that they incurred liability to their subcontractor for damages as a result of their contract with the Government, the liability could be considered actual damages for the plaintiff to support their claim. Merely incurring additional costs was not enough to justify a claim.

The plaintiffs in this case were not able to prove actual damages, as a subcontract made between the plaintiffs and the subcontractor stated: "“The Contractor or Subcontractor shall not in any event be held responsible for any loss, damate [sic], detention, or delay caused by the Owner or any other Subcontractor upon the building; or delays in transportation, fire, strikes, lockouts, civil or military authority, or by insurrection or riot, or by any other cause beyond the control of Contractor or Subcontractor, or in any event for consequential damages.”"Because of this clause, the plaintiffs protected themselves from any liability towards the subcontractor for breaches of contract by the Government, including the one in this case. Therefore, the Severin Doctrine defense for the Government applies since the subcontract expressly released the contractor from responsibility for the subcontractor's losses and thus no actual damages could be claimed.

As a result, the plaintiffs were allowed to recover the $73.71 worth of damages to the N.P. Company incurred as primary contractors; however, the subcontractor was not allowed to recover the damages it incurred, due to a lack of a contract with the United States Government.

The Court also held that if there was a situation where the subcontractor had a claim to file against the United States Government, the subcontractor was not permitted to transfer that claim to a primary contractor company (such as the N. P. Severin Company) to file the claim on its behalf. This concept was discussed in the case Spofford v. Kirk, where the Supreme Court stated: "“It would seem to be impossible to use language more comprehensive than this. It embraces alike legal and equitable assignments. It includes powers of attorney, orders, or other authorities for receiving payment of any such claim, or any part thereof. It strikes at every derivative interest, in whatever form acquired, and incapacitates every claimant upon the Government from creating an interest in the claim in any other than himself.”"This language makes it clear that by allowing the transfer of a claim from a subcontractor to a contractor, it would form an interest that goes beyond what is agreed upon between the contractor and the Government.

Lenient Enforcement
Following the Severin decision, courts demonstrated leniency with subcontractors filing claims under the name of a contractor. In Gardner Displays Co. v. United States, the court held that the government was required to prove that the contractor did not suffer any damages in order to use the Severin Doctrine as a defense, as opposed to earlier cases where the burden of proof fell on the contractor. Additionally, the Board decision in BAE Systems San Francisco Ship Repair further cemented this notion, as it established that proving that a "prime contractor is not liable to its subcontractor is the Government's burden."

Federal Courts have also adjusted the Severin Doctrine to alleviate the strictness of its application. The Court of Federal Claims has limited the strict application of the Severin Doctrine to require “an iron-bound release or contract provision immunizing the prime contractor completely from any liability to the sub.” In other words, if the subcontract does not address the contractor's responsibility for damages incurred by the subcontractor, it does not prevent the subcontractor from seeking compensation from the Government through the contractor. The Severin Doctrine defense for the Government only comes into effect when the subcontract explicitly releases the contractor from any liability for damages incurred by the subcontractor.

With regards to the subcontract, cases such as Keydata Corp. v. United States have further demonstrated a form of leniency. The Court in this case held that if the subcontract states that the contractor is responsible for paying the subcontractor, then the Severin Doctrine does not come into effect. The contractor would be able to seek reimbursement on behalf of the subcontractor and may be obligated by the subcontractor to take legal action against the government.

In James F. Seger v. United States, the Severin Doctrine was deemed applicable in cases where the contractor brings a lawsuit on behalf of the subcontractor for breach of contract, but not when “the subcontractor’s delay claims are eligible for inclusion in an equitable adjustment within the terms of the prime contract." This demonstrated an exception that allowed for the rejection of the Severin Doctrine as a defense for the Government.

Strict Application
However, even with its more lenient application, the Severin Doctrine is still enforced in some jurisdictions, such as Georgia, as seen in Department of Transportation v. Claussen Paving Co. This case held that a contractor was not allowed to recover on behalf of its subcontractors if it was found that the contractor was not liable to the subcontractor.

Similarly, in APAC-Virginia, Inc. v. Virginia Dept. of Highways & Transp., the subcontractor experienced damages due to delays and significant costs caused by inaccurate and inadequate plans and specifications provided by the Department of Transportation. The Court of Appeals of Virginia applied the Severin Doctrine and found that in the absence of privity of contract, a claim based solely on economic loss does not give rise to a cause of action, meaning that a contractor cannot sue the Department of Transportation on behalf of its subcontractor. Citing the Severin Doctrine, judges continue to reject claims against the Government.

The rule established in APAC-Virginia was relaxed in Tyger Construction Co. v. Commonwealth Dept. of Highways & Transp., where the Court ruled that the general contractor was able to proceed with its claim for economic losses against the Virginia Department of Transportation, even though there was no contractual relationship between them.

Overall, despite the ruling in Severin v. United States, the Severin Doctrine’s applicability has been limited. The general understanding is that the contractor has the right to pursue claims on behalf of both themselves and their subcontractors against the Government, unless the Government can prove that the contractor is not obligated to share any resulting compensation with the subcontractor.