Factoring Company Prevails Against State Agency to Enforce the Assignment of Accounts Receivables from a Government Contract

Florida Assignment Boilerplate Did Not Prohibit Assignment to Factor

Under Florida law, there is no statutory prohibition against the assignment of contract proceeds or claims.  In the state form contract for general conditions, however, there is a general anti-assignment provision.  While directed primarily to prevent a contractor from assigning the contract, as opposed to proceeds from the contract, it is arguably broad enough to achieve the same result as the federal Anti-Assignments Act:  “29. Assignment. The Contractor shall not sell, assign or transfer any of its rights, duties or obligations under the Contract, or under any purchase order issued pursuant to the Contract, without the prior written consent of the Customer. In the event of any assignment, the Contractor remains secondarily liable for performance of the contract, unless the Customer expressly waives such secondary liability. The Customer may assign the Contract with prior written notice to Contractor of its intent to do so.”  Florida DMS Purchasing Form 1000; see also Fla. Admin. Code 60A-1.002(7)(b) (requiring use of general contract conditions unless modified by state agency).

Factor Company Not Barred By Sovereign Immunity in Pursuing it Contractual Rights

A recent case, however, found that this boilerplate language did not prevent the factoring company who had properly notified the state agency from enforcing its assignment rights under Florida’s Uniform Commercial Code.  In Department of Transportation v. United Capital Funding Corp. (April 28, 2017), the appellate court affirmed the trial court’s summary judgment in favor of the factoring company.  Arbor One, an FDOT roadside maintenance contractor, had assigned its accounts receivables, including its FDOT contract proceeds, to a factoring company, United Capital Funding.  The factoring companied complied with the UCC procedural requirements.  But, despite receiving notice under Fla. Stat. § 679.4061 (2012), FDOT refused to pay United Capital Funding. United Capital sued.  In affirming the trial court’s summary judgment against FDOT, the appellate court concluded that the government could be an account holder under the applicable UCC Section.  Further, the court held that sovereign immunity did not bar suit by the factoring company against FDOT because of the statutory waiver for FDOT on contracts (Fla. Stat. § 337.19(1) (2012)) and the implied waiver due to the authority to enter into contracts as discussed in Pan-Am Tobacco Corp. v. Department of Corrections, 471 So.2d 4 (Fla. 1984)

Different Result Likely in Federal Government Contract Context

Within the context of a federal procurement, the Anti-Assignments Act, 31 U.S.C. § 3727 and 41 U.S.C. § 15, prohibit a government contractor from assigning contract proceeds or claims to a third party unless specific conditions are met. The Government may waive the requirements of the Anti-Assignment Acts if it is aware of, assents to, and recognizes the assignment.  Federal Acquisition Regulation (FAR) 48 C.F.R. § 32.8, “Assignment of Claims,” sets forth the requirement that the assignment must be made to a “bank, trust company, or other financing institution, including any Federal lending agency.”

The Government’s actions must rise to the level of “clear assent” to the assignment to demonstrate a waiver.  The Court of Federal Claims granted the government’s motion summary judgment where the government knew about the assignment, but it never clearly assented; thus the assignee third party was not entitled to the payment. Ham Investments, LLC v. United States, 388 Fed.Appx. 958, 2010 WL 2788206  (Fed. Cir. 2010), a much different result than the state law case.

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