United Pacific Ins. Co. v. U.S.

• Decision Date: 20 September 2006
• Docket Number: No. 06-5023.,06-5023.
• Parties: UNITED PACIFIC INSURANCE COMPANY, Reliance Insurance Company, and Reliance National, Plaintiffs-Appellants, v. UNITED STATES, Defendant-Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

Page 1325

464 F.3d 1325

UNITED PACIFIC INSURANCE COMPANY, Reliance Insurance Company, and Reliance National, Plaintiffs-Appellants, v. UNITED STATES, Defendant-Appellee.

No. 06-5023.

United States Court of Appeals, Federal Circuit.

September 20, 2006.

Gary A. Wilson, Post & Schell, PC, of Philadelphia, Pennsylvania, argued for plaintiffs-appellants.

Michael N. O'Connell, Trial Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for defendant-appellee. With him on the brief were Peter D. Keisler, Assistant Attorney General, David M. Cohen, Director, and James M. Kinsella, Deputy Director.

Before SCHALL, LINN, and DYK, Circuit Judges.

SCHALL, Circuit Judge.

United Pacific Insurance Company, Reliance Insurance Company, and Reliance National (collectively, "United Pacific") brought suit against the government in the United States Court of Federal Claims under the Tucker Act, 28 U.S.C. § 1491(a)(1). In its suit, United Pacific, which had acted as a Miller Act surety in connection with a government construction project, sought to recover in quantum meruit the amount over and above the original contract price that it was required to pay in order to complete the project after the contractor defaulted. United Pacific alleged that it was entitled to quantum meruit recovery because the contract at issue was illegal and therefore void ab initio. According to United Pacific, the contract was illegal because it was entered into in violation of two statutes, 10 U.S.C. § 2805 (1994) (amended 2000) and 10 U.S.C. § 2811 (1994) (amended 2000), which set forth expenditure limitations and require oversight in connection with certain military construction projects.¹ United Pacific now appeals the decision of the Court of Federal Claims dismissing its suit pursuant to Court of Federal Claims Rule 12(b)(6) for failure to state a claim upon which relief could be granted. United Pac. Ins. Co. v. United States, 68 Fed.Cl. 152, 162 (2005) ("Trial Court Opinion"). We affirm.

BACKGROUND

I.

On October 5, 1995, the United States, through the Contracting Squadron at McGuire Air Force Base in New Jersey, entered into a contract with Castle Abatement Corporation ("Castle"). Under the contract, the government agreed to pay Castle $3,152,174 to provide labor, material, and equipment to renovate three buildings at McGuire Air Force Base.

In accordance with the Miller Act, 40 U.S.C. §§ 270a-d (1994) (current version at 40 U.S.C. §§ 3131-3134 (2000 & Supp.2002)), United Pacific issued a performance bond in the penal sum of $3,152,174 and a labor and material bond in the penal sum of $1,576,087 to the government as obligee.² On July 21, 1997, the government terminated its contract with Castle for default. In response to the government's demand to United Pacific under the performance bond, United Pacific entered into a written takeover agreement with the government in which it agreed to complete the contract work. United Pacific then hired a contractor, Lattimer & Associates, to complete the work. Lattimer eventually completed the contract work at a total cost to United Pacific of $3,525,757.25. At the same time, United Pacific only received a total of $661,512.31 in payments from the government under the contract. That sum apparently represented the balance of the original contract price.

II.

On April 12, 2000, United Pacific filed a request for an equitable adjustment with the contracting officer, claiming that the contract between Castle and the government was void ab initio because it was illegal. United Pacific asked the contracting officer to terminate the contract for the convenience of the government and to pay it the sum of $3,194,490.59. This sum represented the costs United Pacific allegedly incurred in completing the contract work, less the $661,572.31 in payments that it had received from the government. After the contracting officer denied the claim, United Pacific filed an appeal with the Armed Services Board of Contract Appeals ("Board").

On July 20, 2001, the Board issued a decision holding that United Pacific was without standing to assert Castle's pre-takeover claim that the contract was illegal. In re United Pac. Ins. Co., ASBCA No. 53051, 01-2 B.C.A. ¶ 31,527, at 155,640, 2001 WL 865380 (July 20, 2001). Shortly thereafter, however, we decided Fireman's Fund Insurance Co. v. England, 313 F.3d 1344 (Fed.Cir.2002). In Fireman's Fund, we held that the Contract Disputes Act, 41 U.S.C. §§ 601-613, did not give the Board jurisdiction over equitable subrogation claims based on events that took place before a takeover agreement. 313 F.3d at 1352. Based upon Fireman's Fund, the Board issued a reconsideration decision in which it rejected United Pacific's claim on jurisdictional grounds, ruling that United Pacific was not a "contractor" within the meaning of the Contracts Disputes Act with respect to pre-takeover agreement events. In re United Pac. Ins. Co., ASBCA No. 53051, 03-2 B.C.A. ¶ 32267, at 159,622, 2003 WL 21350374 (June 4, 2003). In United Pacific Insurance Co. v. Roche, 380 F.3d 1352, 1358 (Fed.Cir.2004), we affirmed the Board's decision. We held that because "[a]ll of these alleged overpayments to Castle . . . were made prior to the takeover agreement, at a time when United [Pacific] was not yet a `contractor' with the United States," the Board "correctly concluded that it lacked jurisdiction over the claims." Id. at 1356.

On January 12, 2005, United Pacific filed suit in the Court of Federal Claims under the Tucker Act, alleging that the contract between Castle and the government was illegal, and therefore void ab initio, because it was in violation of 10 U.S.C. §§ 2805 and 2811. Consequently, United Pacific urged, as the completing surety, it was entitled to recover its excess costs of completion on a quantum meruit basis. On September 28, 2005, the Court of Federal Claims dismissed United Pacific's suit under Court of Federal Claims Rule 12(b)(6) for failure to state a claim upon which relief could be granted. Trial Court Opinion, 68 Fed.Cl. at 162. The court did so, inter alia, on the ground that United Pacific's suit was foreclosed by our decision in American Telephone & Telegraph Co. v. United States, 177 F.3d 1368 (Fed. Cir.1999) (en banc) ("AT & T III"). Trial Court Opinion, 68 Fed.Cl. at 156-59. At the same time, the court rejected United Pacific's reliance on United States v. Amdahl, 786 F.2d 387 (Fed.Cir.1986), and Godley v. United States, 5 F.3d 1473 (Fed. Cir.1993). Trial Court Opinion, 68 Fed. Cl. at 159 & n. 3. This appeal followed. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(3).

DISCUSSION

I.

"A motion to dismiss . . . for failure to state a claim upon which relief can be granted is appropriate when the facts asserted by the plaintiff do not entitle him to a legal remedy." Boyle v. United States, 200 F.3d 1369, 1372 (Fed.Cir.2000). "In reviewing a dismissal for failure to state a claim, we must assume all well-pled factual allegations are true and indulge in all reasonable inferences in favor of the nonmovant." Anaheim Gardens v. United States, 444 F.3d 1309, 1314-15 (Fed.Cir.2006) (quoting Gould, Inc. v. United States, 935 F.2d 1271, 1274 (Fed.Cir.1991)). We review de novo whether the Court of Federal Claims properly dismissed a complaint for failure to state a claim. Id. at 1314 (citing Boise Cascade Corp. v. United States, 296 F.3d 1339, 1343 (Fed.Cir.2002); Dehne v. United States, 970 F.2d 890, 892 (Fed.Cir. 1992)).

II.

At the time Castle and the government entered into their contract, section 2805, titled "Unspecified minor construction," provided in relevant part:

(a)(1) Except as provided in paragraph (2), within an amount equal to 125 percent of the amount authorized by law for such purpose, the Secretary concerned may carry out minor military construction projects not otherwise authorized by law. A minor military construction project is a military construction project (1) that is for a single undertaking at a military installation, and (2) that has an approved cost equal to or less than $1,500,000.

(2) A Secretary may not use more than $5,000,000 for exercise-related unspecified minor military construction projects coordinated or directed by the Joint Chiefs of Staff outside the United States during any fiscal year.

(b)(1) A minor military construction project costing more than $500,000 may not be carried out under this section unless approved in advance by the Secretary concerned.

(2) When a decision is made to carry out a minor military construction project to which paragraph (1) is applicable, the Secretary concerned shall notify in writing the appropriate committees of Congress of that decision, of the justification for the project, and of the estimated cost of the project. The project may then be carried out only after the end of the 21-day period beginning on the date the notification is received by the committees.

(c)(1) Except as provided in paragraph (2), the Secretary concerned may spend from appropriations available for operation and maintenance amounts necessary to carry out an unspecified military construction project costing not more than $300,000 . . . .

10 U.S.C. § 2805 (emphases added). Section 2811, titled "Repair of facilities," provided in relevant part:

(a) Repairs using operational and maintenance funds. — Using funds available to the Secretary concerned for operation and maintenance, the Secretary concerned may carry, out repair projects for an entire single-purpose facility or one or more functional areas of a multipurpose facility.

(b) Approval required for major repairs. — A repair project costing more than $5,000,000 may not be carried out under this section unless approved in advance by the Secretary concerned. In determining the total cost of a repair project, the Secretary shall include all phases of a multi-year repair project to a single facility. In considering a repair...