All Roar and No Bite: Lion Raisins and the Federal Circuit’s First Swipe at the NAFI Doctrine
Public Contract Law Journal, Vol. 36, p. 153, 2007
22 Pages Posted: 5 Jul 2010 Last revised: 7 Jul 2010
Date Written: 2007
For half a century, the Nonappropriated Fund Instrumentality (NAFI) doctrine has shielded certain federally created entities from suit, holding that they are immune from suit in state and district court because they retain some of the sovereign immunity of the United States, but, unlike arms of the United States, may not be sued in the United States Court of Federal Claims. In the absence of a list of known NAFIs, courts apply an ad hoc test to determine, as a factual matter, whether an entity is a NAFI and, as such, immune from suit. This often leaves government contractors without legal redress against entities that breach their contractual obligations, even when these entities hold themselves out to be agencies of the United States and purport to conduct business in accordance with the federal acquisition regulations.
In its recent Lion Raisins decision, the Federal Circuit, the court which is essentially the final word on issues related to the law of government contracting, addressed the NAFI doctrine, taking up what courts and legal commentators agree is an unjust anomaly in the law. However, rather than resolving the uncertainty created by the NAFI doctrine, the court introduced a new layer of complexity by holding, for the first time, that the United States Court of Federal Claims has jurisdiction over claims for an uncompensated Fifth Amendment taking of property, but not a breach of contract, brought against a NAFI.
This article critiques the distinction introduced by the Federal Circuit in Lion Raisins, examining the history and logic of the NAFI doctrine and the precedent underpinning the court’s recent NAFI decisions. This article concludes by offering a new test for resolving the anomaly created by the NAFI doctrine, drawing on agency principles to construct a coherent NAFI jurisprudence for breaches of contract and Fifth Amendment takings alike.
Keywords: Nonappropriated Fund Instrumentalities, Tucker Act, Government Contracts, Federal Circuit
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