Locke v. United States
283 F.2d 521 (1960)
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Rule of Law:
Where a party is wrongfully deprived of the opportunity to compete for business under a requirements contract, it is entitled to recover damages for the value of that lost chance, even if the contract did not guarantee a specific amount of work.
Facts:
- Harvey Ward Locke's company was awarded a GSA requirements contract to repair manual typewriters in the San Diego area for a one-year period.
- The contract placed Locke's company on a Federal Supply Schedule along with three other local companies from which federal agencies were required to choose.
- While government agencies could select any of the four contractors, Locke was the low bidder among them.
- Several months into the contract period, on February 2, 1956, a government contracting officer terminated Locke's contract for alleged default.
- After this termination, Locke, under a new business name, submitted the lowest bid for a similar GSA contract in Fort Worth, Texas.
- The Texas contracting officer denied Locke the contract, finding that he was not a 'responsible bidder'.
Procedural Posture:
- The GSA contracting officer terminated Harvey Ward Locke's California contract for default.
- Locke appealed the termination to the GSA Board of Review, which found the termination was 'without proper cause' but denied his claim for lost profits.
- Locke separately appealed the finding of nonresponsibility for the Texas contract to the GSA Board of Review, which denied the appeal.
- Locke filed a suit in the U.S. Court of Claims seeking damages for both the California and Texas contract matters.
- The case came before the U.S. Court of Claims on cross-motions for summary judgment filed by Locke and the United States.
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Issue:
Does the wrongful termination of a non-exclusive requirements contract give rise to a claim for lost profits, even though the contractor was not guaranteed any specific amount of business?
Opinions:
Majority - Chief Judge Jones
Yes, the wrongful termination of a non-exclusive requirements contract gives rise to a claim for lost profits. The court reasoned that the opportunity to compete for business has compensable value, and the government's breach deprived the plaintiff of this value. While damages cannot be purely speculative, difficulty in ascertaining the precise amount does not prevent recovery where the fact of damage is a reasonable probability. The court held that the wrongdoer should not benefit from the uncertainty created by its own breach. The court distinguished this case, where the plaintiff had a measurable chance of obtaining business, from prior cases where no such chance existed. However, the court found that damages related to the subsequent denial of the Texas contract were too remote and not a foreseeable result of the California contract's breach, as there was an independent and sufficient basis for the Texas contracting officer's decision.
Analysis:
This decision solidifies the legal principle that a lost opportunity or 'chance' to earn a profit is a cognizable form of contract damage. It is particularly significant for government contractors operating under schedule or requirements contracts where work is not guaranteed. The ruling lowers the burden for plaintiffs by shifting the risk of uncertainty in damage calculation to the breaching party, establishing that a 'reasonable probability' of damage is sufficient to state a claim. This precedent makes it more difficult for a breaching party to escape liability by arguing that the speculative nature of the lost profits makes them impossible to prove.
