United States v. Spearin

Spearin (defendant) entered into a fixed-price contract with the federal government (plaintiff) to construct a dry-dock at the Brooklyn Navy Yard. The dry-dock was to be constructed in strict accordance with the government’s plans and specifications, which included relocating the six-foot sewer line that ran through the dry-dock construction site. Spearin relocated the sewer line in accordance with all government specifications, and the government approved Spearin’s work. Approximately one year later, the sewer line burst because of internal pressure buildup during heavy rainfall, flooding the dry-dock foundation. An investigation determined that a dam in the seven-foot sewer line to which the relocated six-foot sewer line was attached, per government specifications, caused the pressure buildup. The dam was not shown on either the government’s plans or the city’s sewer map. The government knew, but did not disclose to Spearin, that the dry-dock site had been flooded by sewer line overruns in the past. Spearin refused to continue work until the government repaired the flood damage and altered the sewer line to prevent future flooding. The government insisted Spearin was responsible for the consequences of the sewer line break. Because Spearin refused to take responsibility, the government terminated Spearin’s contract. Spearin sued the government, seeking breach of contract damages for the termination, past work, and lost direct profits. The Court of Claims awarded Spearin $141,000 in damages. Spearin appealed, seeking additional damages, and the government cross-appealed, arguing that Spearin was not entitled to recover damages related to the sewer.