Labor & Employment Law Daily Wrap Up, LITIGATION NEWS, TRENDS—USAID contractors whose contracts were terminated by Trump administration proceed with claims, (Apr 15, 2026)

By Brandi O. Brown, J.D.

While the government argued otherwise, the court found the contractors’ complaint “replete with allegations implicating ‘bad faith,’” such as Trump’s statement that USAID has “been run by a bunch of radical lunatics, and we’re getting them out.”

The U.S. Court of Federal Claims declined to dismiss claims made by USAID Personal Services Contract (PSC) contractors for breach-of-contract damages stemming from the federal government’s alleged improper terminations of those contracts and unpaid termination costs. The contractors allege that USAID engaged in bad faith and abuse of discretion when terminating their contracts en masse in January 2025.

The federal government moved to dismiss their claims, arguing that the contractors failed to properly and plausibly plead bad faith and abuse of discretion and that they had conceded that the termination clause costs were paid.

Statements implicating bad faith. “Not so,” said the court, noting that the contractors’ amended complaint was “replete with allegations implicating ‘bad faith.’” It provided some examples from the amended complaint, including, among others: Elon Musk’s statements, via X, that “USAID was a viper’s nest of radical-left [M]arxists who hate America[;]” “USAID is a criminal organization. Time for it to die;” and President Trump’s statement, as quoted in a news article, that USAID has “been run by a bunch of radical lunatics, and we’re getting them out...” and a statement, made in a YouTube video published by the White House, that “USAID is really corrupt. I’ll tell you. It’s corrupt. It’s incompetent.”

“These public statements by various officials may suffice when measured against the metrics of bad faith,” the court explained, but noted that such an “assessment awaits another day.”

Plausible, not probable. Additionally, the court noted that the contractors’ amended complaint also sufficiently raised general abuse of discretion claims, “further buttressing their breach of contract arguments.”

Though the government “certainly made it clear that it disagrees with” the claims, the court explained, that disagreement does not “usurp” its “responsibility to accept as true the allegations in the pleading and ‘indulge all reasonable inferences in favor of the nonmovant.’” While the standard of proof for demonstrating bad faith might be high, the contractors were “not required to prove their entire case in their complaint—the requirement is that the claims are plausible.” The government argued that the contractors failed to allege personal animus or intent to injure and that, as a result, their claims must fail, but that argument, the court explained, “misapprehends the limited burden Plaintiffs face at this stage. Proving their entire case is not yet required.”

The government also asked the court for a “razor-thin interpretation of the legal standards” that would bar the contractors “from even the chance to assert their claims,” arguing that for the court to have jurisdiction, the contractors had to “definitively demonstrate bad faith by the contracting officers who terminated their contracts.” It also claimed that “even if the Court were to accept the plaintiffs’ argument that decisions of the executive branch to reorganize or dismantle USAID were themselves taken in bad faith, that would not translate to bad faith on the part of the contracting officer in terminating the plaintiffs’ contracts.” “Again,” the court explained, “the United States misconstrues the legal standard at this early stage, mutating it from a plausibility standard into a probability standard.”

Costs due under clause. As for the government’s argument that the contractors failed to sufficiently allege breach because certain costs due under the termination clause were paid, the court was not persuaded. “This reasoning is circular. Simply because USAID may have paid out certain costs due under the termination for convenience clauses of Plaintiffs’ contracts does not mean that the clauses themselves have not been breached. When the United States improperly terminates a contract and thereby breaches it, the contractor is entitled to termination costs and breach-of-contract damages.” Moreover, the court explained, whether or not the contractors had been paid all sums due awaited proof, “rather than the bare assertions of” the government defendants.

The case is No. 1:25-cv-01241-DAT.

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