DAMAGE CLAIMS FOR TRUMP'S ACTIONS

 The Sovereign Act Defense and Trump’s Contract Cancellations: Why It Will Fail

In government contract law, the government often asserts the sovereign act defense to shield itself from liability when it takes actions that impact contracts but are carried out in its sovereign capacity rather than its contractual role. This defense, however, has limits. Specifically, when the government acts self-serving, such as terminating contracts to save money or escape obligations, it cannot invoke the sovereign act defense.

Today, the Trump administration’s rampant cancellation of government contracts raises serious legal questions. These cancellations, many of which pertain to goods and services provided by contractors, appear not to be made in the broader interest of the public but rather as part of an agenda that benefits a select group of wealthy individuals. If contractors challenge these cancellations through claims under the changes clause, termination clause, or as outright breach claims, the administration is almost certain to assert the sovereign act defense. However, given the self-interested nature of these actions, this defense should not apply.

A key precedent in this area is the Supreme Court’s decision in United States v. Winstar Corp., 518 U.S. 839 (1996). In Winstar, the Court addressed government liability when it reneged on financial incentives promised to savings and loan institutions during a crisis. The government sought to use the sovereign act defense to avoid liability, arguing that its later regulatory changes were made in its sovereign capacity. However, the Supreme Court ruled that the government could not escape liability when its actions directly undercut the terms of its agreements, effectively invalidating its contractual commitments.

The Winstar ruling is instructive in assessing the Trump administration’s mass contract cancellations. If these terminations primarily advance a political or economic agenda rather than fulfilling an essential sovereign duty, contractors have substantial grounds to argue that the cancellations constitute a breach of contract. The precedent established by Winstar suggests that when the government voluntarily enters into contracts and then changes course in a way that disadvantages contractors without a valid sovereign justification, it cannot rely on sovereign immunity to escape liability.

Importantly, contractors affected by these cancellations have strong affirmative claims under the terms of their contracts. Standard contract clauses, such as the Changes and Termination for Convenience clauses, provide contractors with direct avenues for asserting claims against the government. Furthermore, when the government cancels contracts in a manner that constitutes a breach, contractors have the right to pursue damages under breach of contract theories. The government’s sovereign act defense does not apply when its actions are self-serving and inconsistent with its contractual obligations.

The Trump administration’s approach to government contracts appears driven not by national interest but by an effort to reshape economic structures to favor the wealthiest. This raises a fundamental legal issue: whether these cancellations constitute a legitimate sovereign act or an opportunistic breach of contract. If courts apply the logic of Winstar, the sovereign act defense should fail, leaving the government liable for damages to affected contractors.

In sum, contractors facing arbitrary contract cancellations under this administration should be prepared to challenge any assertion of the sovereign act defense. The Winstar case provides a critical precedent that underscores the principle that the government cannot use its sovereign status to escape liability when its actions are motivated by self-interest rather than legitimate public policy concerns. Contractors must actively assert their rights under the terms of their contracts, as the government’s defense will not prevail in these circumstances.

William Jams Spriggs