Crown Coat Front Co. v. United States

• Decision Date: 22 June 1966
• Docket Number: No. 34,Docket 29710.,34
• Parties: CROWN COAT FRONT CO., Inc., Plaintiff-Appellant, v. UNITED STATES of America, Defendant-Appellee.
• Court: U.S. Court of Appeals — Second Circuit

363 F.2d 407 (1966)

CROWN COAT FRONT CO., Inc., Plaintiff-Appellant, v. UNITED STATES of America, Defendant-Appellee.

No. 34, Docket 29710.

United States Court of Appeals Second Circuit.

Argued October 5, 1965.

Submitted December 9, 1965.

Decided June 22, 1966.

Certiorari Granted October 10, 1966.

Edwin J. McDermott, Philadelphia, Pa. (Jasper I. Manning, New York City, on the brief), for plaintiff-appellant.

Arthur M. Handler, Asst. U. S. Atty., Southern District of New York (Robert M. Morgenthau, U. S. Atty., and Alan G. Blumberg, Asst. U. S. Atty., Southern District of New York, on the brief), for defendant-appellee.

Before LUMBARD, Chief Judge, and WATERMAN, MOORE, FRIENDLY, SMITH, KAUFMAN, HAYS, ANDERSON and FEINBERG, Circuit Judges.

Submitted to the in banc court December 9, 1965.

Certiorari Granted October 10, 1966. See 87 S.Ct. 87.

WATERMAN, Circuit Judge (with whom Chief Judge LUMBARD, Judges MOORE and SMITH, and in a separate statement, Judge FRIENDLY, concur. Judge ANDERSON dissents in a separate opinion with whom Judges KAUFMAN, HAYS and FEINBERG concur):

Plaintiff-appellant, on July 31, 1963, commenced its action against the United States in the United States District Court for the Southern District of New York. After the Government answered, pleading among other things that the action was time-barred, both parties moved for summary judgment. The court below granted the Government's motion and dismissed the complaint on the ground that the complaint had not been filed within six years after plaintiff's cause of action had accrued. 28 U.S.C. § 2401(a). Plaintiff's appeal from the dismissal was heard by a panel of this court composed of Judges Waterman, Hays and Anderson, and while the case was sub judice before the panel, the active circuit judges, on December 9, 1965, voted to consider the case in banc without further briefs or oral argument. The thrust of appellant's claim on appeal is that it was required fully to exhaust the administrative remedies it had agreed to pursue under the "disputes clause" of its contract before it could institute a suit against the United States, and that, having filed its suit within six years after the final decision in the matter by the Armed Services Board of Contract Appeals, it had therefore filed within six years from the date that its right of action accrued.¹

The Government, meeting this thrust, briefed its case on the sole issue whether, "pursuant to 28 U.S.C. § 2401(a), a contractor's `right of action' against the Government `first accrues' (i) on the date of the alleged breach of contract by the Government, or (ii) on the date of a decision of the ASBCA denying the contractor's claim."

On May 14, 1956 the appellant entered into a contract with the Government to manufacture and deliver 89,786 felt canteen covers for a total agreed price of $60,691.76. The contract called for the use of mildew-resistant felt, made in accordance with certain established specifications, and provided for the submission of samples to the Government for testing and inspection, prior to manufacture. It also stipulated that if these samples did not meet specifications, the Government had "the right either to reject them or to require their correction." In addition, the agreement included the standard "disputes" clause which required that, in the first instance, "any dispute concerning a question of fact arising under this contract which is not disposed of by agreement shall be decided" by the Contracting Officer, from whose decision an appeal could be taken to the Armed Services Board of Contract Appeals (ASBCA).²

In accordance with the contract, appellant submitted four lots of felt samples for testing and inspection. After making laboratory tests in October and November 1956, the Government rejected the samples. Thereupon the appellant requested, and the Government agreed to accept, the delivery of the canteen covers made from the non-conforming felt. A contract modification of $.005 less per unit — a total of $270.01 — was agreed upon. Final delivery was made on December 14, 1956, and in all other respects the modified contract was fully performed.

The appellant claims that it was not until nearly five years later that it first learned the Government had improperly tested the samples by submitting them to a different test than contemplated by the contract. On October 4, 1961, appellant's counsel wrote the Contracting Officer and demanded (1) a refund of the $270.01 price adjustment, and (2) an equitable adjustment for alleged increased extra production costs resulting from the initial rejection of the samples. On February 21, 1962, the Contracting Officer filed a decision in which he found that the Government had determined by "an established commercial test method" that the felt samples were nonconforming, and that the price reduction was proper. By opinion dated February 28, 1963, the ASBCA affirmed the Contracting Officer's denial of the claim. On July 31, 1963, five months after the ASBCA decision, but more than six years after the December 14, 1956 final delivery of canteen covers and presentation of the final invoice, appellant brought this suit under the Tucker Act, 28 U.S.C. § 1346(a) (2), demanding the $270.01 and a sum "not exceeding $10,000 as the court may deem just and equitable" as compensation for the alleged extra production costs. As stated above, on cross-motions for summary judgment the district judge dismissed the complaint, holding that it had been time-barred by the six year limit³ within which Congress had authorized suspension of the Government's sovereign immunity from suit.⁴ This appeal followed. We affirm the district court.

At the outset we agree with the finding of the court below that the alleged breach of the contract occurred at the very latest on December 14, 1956. That was the date of the final delivery of the canteen covers found to be nonconforming by the use of a test not contracted for. The right of action against the Government accrued at the time of the breach of the agreement by the Government and not at some later time. This would appear to be settled by McMahon v. United States, 342 U.S. 25, 72 S.Ct. 17, 96 L.Ed. 26 (1951) where the Supreme Court held in a much more appealing case that a seaman's claim for injuries arose when he was injured, and not when his claim had been finally administratively disallowed. The Court specifically rejected both the contention that the seaman could not sue until disallowance and that he had no cause of action until then. As the Court pointed out, even where statutes are to be construed liberally for the benefit of seamen, "it is equally true that statutes which waive immunity of the United States from suit are to be construed strictly in favor of the sovereign," supra at 27, 72 S.Ct. at 19. Hence there the two year period of limitation built into the Suits in Admiralty Act⁵ was held to begin to run as of the date of the injury.

Following McMahon, and after the passage of the Wunderlich Act, May 11, 1954, c. 199, 68 Stat. 81, 41 U.S.C. §§ 321-322, we, in States Marine Corp. of Del. v. United States, 283 F.2d 776 (2 Cir. 1960) ruled against a libelant who claimed that the Government in December 1954 had breached a contract with it. We so ruled because the plaintiff's libel had not been filed until September 1957, even though during 15 months of the elapsed 33 months the contractor's claim had been under consideration, first by the Contracting Officer and then by the ASBCA, pursuant to a "Disputes" clause in the contract like the "Disputes" clause in appellant's contract.⁶

In fact, in States Marine we disposed of every claim appellant makes here. We held that the contractor should not await final decision of the ASBCA, in accord with his agreement to submit disputes to the agency officers, before commencing a protective suit, and that the time-bar period did not begin to run from the time of the final decision of the ASBCA, but, as the right of action accrued at the time of the breach, the time-bar began to run then. Moreover, we held, supra at 779, that the running of the time-bar was not tolled during the period when the claim was under administrative consideration.

Unless a reason exists for differently treating a suit brought pursuant to the permission granted by the Tucker Act from a suit brought pursuant to the permission granted by the Suits in Admiralty Act, we would be required to overrule the law of this circuit laid down in States Marine and reaffirmed in Isthmian S. S. Co. v. United States, 302 F.2d 69 (2 Cir. 1962) if we were to grant relief to the appellant here.

After final briefs had been filed by the parties the Third Circuit handed down its opinion in Northern Metal Co. v. United States, 350 F.2d 833 (3 Cir. 1965). In that case McMahon was followed as to the fixing of the time when the two-year time-bar began to run, but, in direct conflict with the opinion of our court in States Marine Corp. of Del. v. United States, supra, and the decisions following it (including the district court opinion appealed from in Northern Metal Co. v. United States, 230 F.Supp. 38 (E.D.Pa. 1964)) the Third Circuit held that the running of this time-bar was tolled during the pendency of the administrative proceedings. The issue of such a possible tolling of the Tucker Act's six-year time-bar had not been comprehended within the thrust of appellant's contentions, see footnote 1; and that fact, together with the square conflict of the two circuits relative to the tolling of the Suits in Admiralty Act's two-year time-bar, caused the panel sua sponte to refer adjudication of the case to all the active judges.⁷

Though the more recent Suits in Admiralty Act appears in the U. S. Code, section for section, much as it was when adopted in 1920, and the various provisions, section for section, of the eighty-year old Tucker Act are split up, here and there, in Title 28 of the Code, both Acts of Co...