Blue Fox, Inc. v. Small Business Admin.

Decision Date25 August 1997
Docket NumberNo. 96-35648.,96-35648.
Citation121 F.3d 1357
PartiesBLUE FOX INC., a Washington Corporation, Plaintiff-Appellant, v. SMALL BUSINESS ADMINISTRATION; The United States Army, Defendants-Appellees.
CourtU.S. Court of Appeals — Ninth Circuit

Thomas F. Spaulding, Spaulding, Cox & Schaeffer, LLP, Portland, OR, for plaintiff-appellant Blue Fox Inc.

Herbert C. Sundby, Assistant United States Attorney, Portland OR, for defendants-appellees United States Small Business Administration and the United States Department of the Army.

Before: FERGUSON, REINHARDT, and RYMER, Circuit Judges.

FERGUSON, Circuit Judge:

Blue Fox appeals from a summary judgment in favor of the Small Business Administration and the Department of the Army. Blue Fox was a subcontractor which worked on a construction project at an Army Depot. After the prime contractor failed to pay Blue Fox in full, Blue Fox sought an equitable lien against funds held by the Army and Small Business Administration which has since been distributed to the prime contractor. Contrary to the district court, we hold that the Administrative Procedure Act permits Blue Fox's equitable lien claim against the Army because an action for specific performance for the payment of money is not an action for money damages. We affirm the district court's decision that a lien cannot be enforced against the Small Business Administration because that agency never possessed nor controlled the contract fund.

I. FACTUAL BACKGROUND

Section 8(a) of the Small Business Act, 15 U.S.C. § 637(a), established a business development program for firms deemed to be socially and economically disadvantaged. The purpose of the 8(a) program is to help small businesses owned and controlled by socially and economically disadvantaged individuals and economically disadvantaged Indian tribes "to compete on an equal basis in the mainstream of the American economy." 13 C.F.R. § 124.1(a). This is accomplished by setting aside certain government procurement contracts to be awarded by the Administrator of the SBA to firms determined by the SBA to be socially and economically disadvantaged. The Small Business Act also authorizes SBA to provide financial assistance to support such small business concerns with regard to costs and technical and management assistance. 13 C.F.R. § 124.1(b).

In September, 1993, pursuant to Section 8(a) of the Small Business Act, 15 U.S.C. § 637(a), the United States Department of the Army awarded a contract to the United States Small Business Administration. The contract involved the installation and testing of a telephone switching system and the construction of a facility to house the switching system at the Umatilla Army Depot, Oregon. SBA agreed to furnish the supplies and services requested by the Army by subcontracting with Verdan Technology, Inc.

The Army, SBA, and Verdan then signed a tripartite agreement. Under the terms of the contract, SBA delegated responsibility for administering the contract back to the Army. Thus, Verdan was to be paid directly by the Army. The SBA did not receive any funds in connection with the contract, the total amount of which was $432,392.13.

The original solicitation issued by the Army required the contractor to furnish payment and performance bonds if the contract exceeded $25,000. However, the Army later amended the solicitation, deleting the bond requirements. Defendants now concede that the Verdan contract was subject to the Miller Act, 40 U.S.C. §§ 270a-270d.1 However, SBA did not grant an exemption to Verdan from Miller Act bond requirements under 13 C.F.R. § 124.305 (1990), which enumerated requirements concerning SBA control of contract funds and notice to subcontractors in the event that SBA granted an exemption to the Miller Act bond requirement.2

Verdan entered into a subcontract with Blue Fox, Inc., whereby Blue Fox agreed to construct a concrete block building to house the switching system and install several other specific items of the contract. The total cost of the work to be performed by Blue Fox was $186,347.80.

Blue Fox did not know until it had completed its performance under the contract that Verdan had not furnished a payment or performance bond. Verdan failed to pay Blue Fox its full contract price — the sum of $46,586.14 remained due. Blue Fox informed the Army and SBA in writing on May 26, 1994, and again on June 15, 1994, that it had not been fully paid. The Army disbursed a total of $86,132.33 to Verdan between July 5, 1994 and October 11, 1994.

On January 3, 1995, the Army terminated the contract for default because Verdan failed to adhere to the contract's delivery schedule and to submit required contractor Data Requirement Lists. In its notice of intention to terminate the contract, the Army indicated that one of its "most severe items of concern" was Verdan's failure to pay Blue Fox.

After the termination of the Verdan contract, the Army chose Dynamic Concepts, Inc. to finish the uncompleted portion of the work, under an existing contract between the Army and Dynamic. This contract did not include the SBA as a party. The modification contract with Dynamic was for $126,772.78 and was partially funded with the undisbursed balance on the Verdan contract, $84,910.52.3

Blue Fox obtained a default judgment in the Tribal Court of the Yakima Indian Nation against Verdan and its officers. Blue Fox asserts that it is unlikely to collect on these judgments because existing liens against Verdan precede Blue Fox's judgment and the judgment exceeds the officers' individual net worths.

In this litigation, the district court denied Plaintiffs motion for summary judgment and granted Defendant's motion for summary judgment. The court held that it did not have jurisdiction over Blue Fox's claim against the Army because the Administrative Procedure Act did not constitute a waiver of sovereign immunity in this case. Additionally, the court held that it could not grant an equitable lien against SBA because there had been no res in SBA's possession and control to which an equitable lien could attach.

II. DISCUSSION

We review questions involving principles of sovereign immunity de novo. United States v. Woodley, 9 F.3d 774, 781 (9th Cir. 1993). A grant of summary judgment is reviewed de novo. Bagdadi v. Nazar, 84 F.3d 1194, 1197 (9th Cir.1996).

A. Equitable Lien Claim Against the Army

The district court held that Blue Fox's suit against the Army is barred by the doctrine of sovereign immunity. However, sovereign immunity against federal agencies has been waived as to suits "seeking relief other than money damages," under the Administrative Procedure Act, 5 U.S.C. § 702 ("APA"). The Supreme Court has held that monetary relief is available under the APA when it takes the form of specific relief rather than compensatory damages. Bowen v. Massachusetts, 487 U.S. 879, 893, 108 S.Ct. 2722, 2731, 101 L.Ed.2d 749 (1988). In Bowen, the Supreme Court quoted from Judge Bork's opinion in Maryland Department of Human Resources v. Department of Health and Human Services, 763 F.2d 1441, 1446 (D.C.Cir.1985), to explain the scope of the APA waiver of immunity for suits seeking other than money damages:

"We begin with the ordinary meaning of the words Congress employed. The term `money damages,' 5 U.S.C. § 702, we think, normally refers to a sum of money used as compensatory relief. Damages are given to the plaintiff to substitute for a suffered loss, whereas specific remedies `are not substitute remedies at all, but attempt to give the plaintiff the very thing to which he was entitled.' D. Dobbs, Handbook on the Law of Remedies 135 (1973). Thus, while in many instances an award of money is an award of damages, `occasionally a money award is also a specie remedy.' Id. Courts frequently describe equitable actions for monetary relief under a contract in exactly those terms."

Bowen, 487 U.S. at 895, 108 S.Ct. at 2732. Here, Blue Fox seeks an equitable lien only for the very thing to which it is entitled under the contract. Blue Fox does not seek any consequential damages to compensate losses suffered beyond the contract price. Therefore, the district court had jurisdiction to consider its claim under the APA.

1. APA Waiver Not Limited to Statutory Rights

The district court erred in assuming that because Blue Fox sought monetary relief and its right was not statutorily derived, such relief constituted "money damages" and was excluded from the waiver of sovereign immunity contained in the Administrative Procedure Act. The district court characterized the issue as a choice between an action for damages or an action for payment of money to which Blue Fox was statutorily entitled. Because the Miller Act does not provide a remedy for subcontractors against the government, the district court held that nonstatutory remedies were barred and the APA could not apply to waive immunity. However, there is no requirement in Bowen or the APA that the specific relief requested be statutorily granted. That is, a party need not rely upon a statute in order to obtain federal court jurisdiction under the APA. See Aetna Casualty and Surety Co. v. United States, 71 F.3d 475 (2nd Cir.1995) (APA waived sovereign immunity against subrogation claim because surety's right to subrogation, arising by operation of law, was equitable and therefore included in APA waiver). Although Bowen itself was concerned with funds to which Massachusetts was entitled by statute, there is nothing in that opinion that suggests the APA's waiver of immunity is limited to suits brought under another statute. Thus, the district court erred in assuming that because Blue Fox was not entitled to relief under the Miller Act, its equitable lien claim was impermissible under the APA.

2. An Equitable Lien Claim is Not an Action for Damages

This circuit has recognized subcontractors' equitable rights against the government where the subcontractor was not...

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