SAN FRANCISCO – A federal court has granted summary judgment in a California construction company's favor in a suit brought by an Afghan subcontractor terminated from a project.
The court ruled in a summary judgment motion brought against Environmental Chemical Corp. by Afgan entity Arvin Kam Construction Co. on April 15.
Judge James Donato of the U.S. District Court for the Northern District of California addressed the similar cross-motions brought against both parties in the case. He determined that the facts presented are undisputed so summary judgment is warranted for ECC, but the fraud-based claims were left undecided because neither side argued the claims.
ECC is a construction company based in California that specializes in environmental remediation projects. In 2010, the U.S. Army Corps of Engineers (COE) awarded a contract to ECC to construct several of its facilities in Afghanistan. The project would be a joint venture that included an ECC affiliate. The project included construction of the Afghan National Police building in Kunduz Province. ECC hired AKCC to be a subcontractor on this specific project, the ruling states.
During the construction, then-President Barack Obama signed the National Defense Authorization Act (NDAA) in December 2011.
“The NDAA addressed a number of national security issues and programs, and included several provisions directed to counter-terrorism efforts and holding enemy combatants to account for aggression against the United States and its allies,” according to the ruling. “One of these provisions was Section 841 of the NDAA, which imposed a ‘Prohibition on Contracting with the Enemy in the United States Central Command Theater of Operations.’”
This meant that contracts providing funds, both directly and indirectly, to entities that were known opposition to the United States would be terminated. The suit states AKCC was determined to have been "a supporter of enemy insurgency against the United States."
“In August 2012, a COE contracting officer instructed ECC to ‘terminate Arvin Kam Group’ or face default proceedings,” according to the ruling. The ECC terminated AKCC’s contract a few days later.
“Although the termination had been effected under the NDAA, AKCC and ECC entered into settlement agreements in 2013 and 2014,” the ruling states.
AKCC demanded that it be compensated for being released early from the contract. The agreement stated that the ECC would pay AKCC $1.5 million directly and submit a reimbursement claim of $3 million to the U.S. government on AKCC's behalf.
AKCC claimed that the ECC did not live up to its settlement agreement.
The court ruled that the AKCC cannot challenge that the U.S. made the insurgency determination after the bill was signed into law. The ECC was obligated, legally, to terminate the subcontract.
“The record establishes, free of any genuine disputes of fact, that the agreements are unenforceable as against public policy,” according to the ruling. “Consequently, summary judgment against AKCC on the contract claims is warranted.”