Sunrez Corporation, a small business contractor, entered into a Small Business Innovative Research (SBIR) contract with the United States Air Force in March 2014. The contract required Sunrez to design and deliver six prototype next-generation composite 463L air-cargo pallets and a Draft Technical Data Package (TDP). The Air Force sought more durable and cost-effective pallets to replace the legacy balsa/aluminum design, which had been manufactured by one source since 1963.
During performance, disputes arose over the scope of the Draft TDP. The Air Force requested detailed technical data sufficient for competitive re-procurement, while Sunrez maintained the contract only required initiation of the TDP, not full delivery, during Phase II. Sunrez also asserted its SBIR data rights limited the government’s access to proprietary details of its design. The prototypes failed initial structural testing, and the Air Force did not proceed with further evaluation or award a Phase III contract. In 2020, Sunrez submitted a $132 million claim under the Contract Disputes Act, alleging the Air Force breached the contract by refusing to submit its design for certification and by attempting to force forfeiture of its data rights.
Sunrez filed suit in the Court of Federal Claims in 2021, alleging multiple causes of action, including breach of contract and regulatory taking. In 2022, the court narrowed the case to one count: breach of the implied duty of good faith and fair dealing. Discovery followed, and both parties moved for summary judgment. The dispute focused on whether the contract required delivery of a Draft TDP during Phase II, and whether the Air Force acted in bad faith by seeking access to Sunrez’s data.
Sunrez argued the Air Force accelerated the contract’s requirements and pressured it to relinquish data rights in violation of SBIR policy. The Air Force contended the contract unambiguously required delivery of a Draft TDP and that its actions were consistent with the contract’s terms. The government also emphasized that Sunrez could have marked proprietary data to protect it but failed to do so.
The court reviewed the contract’s language, particularly Task 4 of the Work Plan, which required a Draft TDP “sufficient to allow competitive re-procurement and spares procurement” to be initiated at the completion of Phase II. The court held that when read as a whole, the contract required Sunrez to develop and deliver a Draft TDP by the end of Phase II. It found Sunrez’s interpretation—that only initiation was required—was inconsistent with the contract language and purpose, which contemplated competitive procurement in later phases.
On the implied duty of good faith and fair dealing, the court explained that a breach occurs when one party undermines the other’s reasonable expectations under the contract. Sunrez alleged the Air Force engaged in a “bait-and-switch” and conspired to obtain its data improperly. The court found no evidence that the Air Force eliminated or rescinded contractual benefits, noting the government paid for six prototypes and the Draft TDP as agreed. The court also rejected claims of coercion, finding the Air Force’s communications acknowledged Sunrez’s retention of data rights and did not condition a Phase III award on their forfeiture.
On March 7, 2025, the Court of Federal Claims granted the government’s motion for summary judgment and denied Sunrez’s cross-motion. It held that the Air Force had not breached the implied duty of good faith and fair dealing, and the contract required delivery of the Draft TDP as a Phase II obligation. Sunrez’s claims were dismissed, and judgment was entered for the United States.
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