Southwest Marine, the operator of a shipyard in San Diego, California, was awarded and performed several contracts with the United States Navy for repairs and alterations to Naval vessels. During the time period relevant to this dispute, some of Southwest Marine's government contracts were cost-reimbursement contracts, which provided that the Government would reimburse Southwest Marine's costs deemed allowable in accordance with Subpart 31.2 of the Federal Acquisition Regulation. Southwest Marine was sued and lost a CWA case brought by a private party, the NRDC.
In Southwest Marine, Inc. v. United States et al, 2008 U.S. App. LEXIS 16595 (9th Cir.: 8/6/08), the 9th Circuit affirmed a District Court ruling that the legal costs incurred by Southwest Marine in the CWA litigation were not allowable "costs" under the Federal Acquisition Regulation, 48 C.F.R. §§ 31.201-31.205.