Court Denies Petition to Hear Tecom Case

The US Court of Appeals for the Federal Circuit denied the petition to rehear the Geren V Tecon Inc. case 566 F.ed 1037. The Tecon case created what commentators have called the “untenable test” where costs incurred in the defense of an employment discrimination suit settled before trial are unallowable unless the contractor can prove the allegations against it had “very little likelihood of success on the merits.” As we reported earlier the case extends the provisions that only settlements of false claims, false statements, fraud or other misconduct against the US would be subject to this test. Commentators say now the Tecom case penalizes a contractor that has made a prudent business decision to avoid costly litigation to settle private lawsuits where now the allowability of such costs will be made against the “little likelihood of success” test to be made by contracting officers who have little experience in determining such merits. Now government contractors will be effectively forced to take the expensive and uncertain litigation route in hopes of obtaining a successful result to recover its legal costs.

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