Eckland and Blando LLP

Minnesota State Court Dismisses Various State Law Claims on the Basis of the FAR's Continuity of Services Clause

In what is believed to be a case of first impression, the law firm of Eckland & Blando LLP recently obtained the dismissal of a civil action alleging various claims brought pursuant to state law on the basis that said claims were precluded by the plaintiff's own federal government contract.  In a decision dated November 9, 2010, the Honorable Charles A. Porter, Jr., a District Court Judge of the State of Minnesota's Fourth Judicial District ("the Court"), dismissed with prejudice the action captioned The Talus Group v. Topologe, LLC, et. al., in favor of defendants.  Although plaintiff's complaint was framed as a state law contract dispute, the Court recognized that federal government contract law was an intrinsic element of the action.  Specifically, the Court held that the inclusion of Federal Acquisition Regulation ("FAR") Clause 52.237-3 - "the Continuity of Services Clause" - within the plaintiff's federal government contract, along with the promulgation of Executive Order 13495, precluded the action as a matter of law.  In so ruling, the Court expressly noted that federal government contract law principles may not be disregarded in a civil action brought pursuant to state law.

Pursuant to a Motion to Dismiss brought by Eckland & Blando, defendants maintained that plaintiff's civil action must be dismissed pursuant to Minnesota law by reason that said law precludes the enforcement of contracts that contravene federal law or policy.  First, the plaintiff's own government contract with the USFWS contained FAR 52.237-3, the Continuity of Services Clause.  In the event that the follow-on USFWS government contract was not awarded to plaintiff, this Clause requires the plaintiff to release its employees to work with the follow-on government contractor.  However, plaintiff's employment contracts with the two individual defendants contained non-competition clauses.  Because Minnesota law does not recognize contract clauses that directly conflict with law or public policy, and the non-competition clauses directly conflicted with the requirements set forth in the FAR clause, defendants argued that the non-competition clauses are unenforceable as a matter of law.  Second, plaintiff's claims conflicted with the public policy set forth in Executive Order 13495, which requires that follow-on contractors extend employment offers to employees terminated by the predecessor contractor.  As a result of the conflict between EO 13495 and plaintiff's claims for breach of contract and tortious interference, defendants also argued that these claims could not succeed as a matter of law.  Concurring with the defendants, the Court ordered that all claims be dismissed with prejudice.