PAE Government Services, Inc. v. MPRI, Inc.

PAE Government Services, Inc. (PAE) (plaintiff) filed a breach of contract claim against MPRI, Inc. (defendant). In the complaint, PAE alleged that the companies had worked together on a bid for a government contract and signed a teaming agreement (agreement). PAE alleged that the teaming agreement constituted a contract that MPRI breached by refusing to subcontract with PAE after the bid was selected. PAE’s breach-of-contract claim was dismissed by the district court on the ground that the agreement did not constitute a contract but was only an “agreement to agree.” PAE amended the complaint, alleging that after the bid was selected, the companies entered into another agreement that constituted a contract because it was confirmed in writing and by the course of conduct of the parties. PAE’s complaint also included an alternative theory of promissory estoppel. The district court dismissed the amended complaint as a sham pleading on the ground that PAE’s allegation that a second contract existed contradicted the original complaint. Additionally, the district court held that promissory estoppel was not recognized by Virginia law. After the second dismissal, PAE amended its complaint again to add more detail about the second agreement, but the district court dismissed the case with prejudice. The matter was appealed. On appeal, MPRI argued that the district court has the authority to dismiss a case filed in bad faith.