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Under the Christian Doctrine, prime contractors face the risk of having a court or a board of contract appeals read a clause into their contracts, even if it was omitted from the contract that they signed. In this entry we discuss whether the Christian Doctrine applies to subcontractors.

The Christian Doctrine is almost certainly inapplicable to subcontractors. For the reasons why, consider the decision in Energy Labs, Inc. v. Edwards Engineering, Inc., (N.D. Ill. June 2, 2015). A subcontractor contracted to manufacture and deliver HVAC systems for the Chicago Transit Authority. In its own contract, the prime contractor certified that the HVAC system would comply with the Buy America Act. But the prime contractor failed to flow the requirement down to the HVAC manufacturer, which planned to manufacture the units in Mexico. After learning that the plan to manufacture the units in Mexico would not meet the Buy America requirement, the prime contractor canceled the order and purchased the units from another manufacturer.

The original manufacturer sued for breach of contract. In its motion to dismiss, the prime contractor made two arguments. The subcontract was “illegal” because it omitted the Buy America requirement. Or it was legal only because the Christian Doctrine meant that the Buy America requirement was read into the subcontract by operation of law. The court rejected both arguments. There was nothing “illegal” about the prime’s failure to include a Buy America requirement in the subcontract. And there was no basis to read the requirement into the subcontract through the Christian Doctrine. “The Christian doctrine . . . was intended to apply to contracts between the federal government and government contractors, not to subcontracts.”

This result is consistent with our experience.

You’ve heard by now that the Supreme Court’s decision in Atlantic Marine Constr. Co. v. United States District Court, No. 12-929 (U.S. Dec. 3, 2013) is a strong endorsement of a contractor’s right to choose the forum that will resolve disputes with subcontractors. We discuss the Court’s decision in an earlier post.

So you know that you can have a forum selection clause. But Atlantic Marine doesn’t answer the hard question, which is this—

How do you write a forum selection clause that will be reliably and economically enforced—without an expensive trip through the court system, perhaps even all the way to the Supreme Court?

Here are some basic points on drafting a forum selection clause, drawn from some of the dozens of reported court cases addressing them—

The United States Defense Department has published a final cybersecurity regulation concerning unclassified “controlled technical information.” See 78 Fed. Reg. 69,273 (Nov. 18, 2013) [pdf]. The objective of the regulation is to require contractors to maintain “adequate security” on unclassified information systems on which CTI may reside or transit and to implement detailed reporting requirements for “cyber incidents.” The final rule is narrower than the proposed regulation, which sought to safeguard unclassified DoD information generally.  See 76 Fed. Reg. 38,089 (June 29, 2011) [pdf].

Definition of CTI

The final rule includes a new DFARS provision (DFARS 204.7300) and a DFARS contract clause (DFARS 252.204.7012), which impose new security measures and reporting requirements on contractors and subcontractors whose work involves unclassified “controlled technical information resident on or transiting through contractor information systems.”

The rule broadly defines CTI as “technical information with military or space application that is subject to controls on the access, use, reproduction, modification, performance, display, release, disclosure, or dissemination.”  DFARS 204.7301.

The term “technical information” is further defined to mean “recorded information, regardless of the form or method of the recording, of a scientific or technical nature . . . .” See DFARS 252.227-7013. Examples of technical information include research and engineering data, engineering drawings and associated lists, specifications, standards, process sheets, manuals, technical reports, technical orders, catalog-item identifications, data sets, studies and analyses and related information, and computer software executable code and source code.

While this is a broad definition, comments on the new rule limit its application to information requiring controls pursuant to DoD Instruction 5230.24 [pdf] and DoD Directive 5230.25 [pdf]. Contractors should not have to devote resources simply to the task of determining whether information is CTI or not.

The Contract Disputes Act gives prime contractors a straightforward procedure for resolving claims against the federal government. But there is no mandatory approach to resolving disputes between contractors and subcontractors. Private parties may agree to arbitrate their disputes or designate a specific court to hear them. They may identify the applicable law, provide for the recovery of attorney’s fees, and prescribe any number of other details.

The Supreme Court’s decision in Atlantic Marine Constr. Co. v. United States District Court for Western District of Texas, No. 12-929 (U.S. Dec. 3, 2013), holds that forum selection clauses in subcontracts on federal projects are enforceable. In this first blog post of a two-part series, we discuss the decision in Atlantic Marine and the limits of the Supreme Court’s analysis. In the subsequent one, we will discuss the use of subcontract dispute resolution clauses more broadly.