Automatic Sprinkler Corp. of America v. Darla Environmental Specialists Inc.

• Citation: 53 F.3d 181
• Decision Date: 28 April 1995
• Docket Number: No. 94-2682,94-2682
• Parties: AUTOMATIC SPRINKLER CORPORATION OF AMERICA, Plaintiff-Appellee, v. DARLA ENVIRONMENTAL SPECIALISTS INC. and Darla Environmental Inc., Defendants. Appeal of UNITED STATES of America, Third-Party Respondent.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

Page 181

53 F.3d 181

63 USLW 2700

AUTOMATIC SPRINKLER CORPORATION OF AMERICA, Plaintiff-Appellee, v. DARLA ENVIRONMENTAL SPECIALISTS INC. and Darla Environmental

Inc., Defendants.

Appeal of UNITED STATES of America, Third-Party Respondent.

No. 94-2682.

United States Court of Appeals, Seventh Circuit.

Argued April 7, 1995.

Decided April 28, 1995.

Joseph R. Marconi, Michael J. Lynch (argued), Johnson & Bell, Chicago, IL, for Automatic Sprinkler Corp. of America.

Steven C. Mason, Office of U.S. Atty., Civ. Div., Appellate Section, Chicago, IL, for General Services Admin.

Before CUMMINGS, EASTERBROOK, and RIPPLE, Circuit Judges.

EASTERBROOK, Circuit Judge.

Buchanan v. Alexander, 45 U.S. (4 How.) 20, 11 L.Ed. 857 (1846), holds that money retained by the United States for the benefit of its employees may not be reached by the employees' creditors unless Congress has enacted a statute authorizing garnishment or equivalent relief. Otherwise, the Court believed, the principle of sovereign immunity prevents a judge from directing how, when, and to whom the United States should distribute funds. In this case the district judge concluded that application of Buchanan would work an injustice to a creditor and wondered aloud: "Do I follow rule, or do I follow reason?" 852 F.Supp. 16, 17 (1994). The judge called Buchanan an "anachronism," id. at 18, elected to follow reason, and ordered the United States to pay the creditor. We follow rule--as the Supreme Court insists we must, no matter how old the rule and no matter how much it differs from a judge's view of sound policy. Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U.S. 477, 484, 109 S.Ct. 1917, 1921, 104 L.Ed.2d 526 (1989); Thurston Motor Lines, Inc. v. Jordan K. Rand, Ltd., 460 U.S. 533, 535, 103 S.Ct. 1343, 1344, 75 L.Ed.2d 260 (1983); Hutto v. Davis, 454 U.S. 370, 102 S.Ct. 703, 70 L.Ed.2d 556 (1982).

Darla Environmental Specialists performed construction work for the United States, which owes Darla about $450,000, the retainage on the contract. Darla dissolved without claiming the money; it has no incentive to do so, because its debts exceed $450,000. Automatic Sprinkler Corporation worked as a subcontractor on the job. Darla owes it some $490,000. Automatic Sprinkler reduced the debt to judgment in this diversity action and sought to collect from the United States under Fed.R.Civ.P. 69. The United States invoked sovereign immunity and added that Darla owes taxes that must be subtracted from the $450,000. It fears that Darla may have other creditors, each of whom may demand payment; Darla's successors or distributees also may lay claim to the $450,000. The district judge ordered the United States to pay Automatic Sprinkler notwithstanding the doctrine of sovereign immunity and the possibility of additional or inconsistent claims to the fund.

Automatic Sprinkler believes that sovereign immunity is inapplicable because it is trying to collect money that the United States concededly owes to Darla. This does not cut much ice. Buchanan did not turn on the procedure by which the creditor asserted its claim. The principle of governmental immunity is simple: anyone who seeks money from the Treasury needs a statute authorizing that relief. United States v. Sherwood, 312 U.S. 584, 61 S.Ct. 767, 85 L.Ed. 1058 (1941); United States v. King, 395 U.S. 1, 4, 89 S.Ct. 1501, 1502, 23 L.Ed.2d 52 (1969); United States v. Testan, 424 U.S. 392, 399-403, 96 S.Ct. 948, 953-56, 47 L.Ed.2d 114 (1976); Army & Air Force Exchange Service v. Sheehan, 456 U.S. 728, 738-41, 102 S.Ct. 2118, 2124-26, 72 L.Ed.2d 520 (1982); Library of Congress v. Shaw, 478 U.S. 310, 315-17, 106 S.Ct. 2957, 2961-63, 92 L.Ed.2d 250 (1986); United States v. Nordic Village, Inc., 503 U.S. 30, 33-34, 112 S.Ct. 1011, 1014-15, 117 L.Ed.2d 181 (1992); FDIC v. Meyer, --- U.S. ----, ---- - ----, 114 S.Ct. 996, 1000-04, 127 L.Ed.2d 308 (1994). Automatic Sprinkler has not pointed to such a statute; none exists. See also Franchise Tax Board v. Postal Service, 467 U.S. 512, 516-17, 104 S.Ct. 2549, 2552-53, 81 L.Ed.2d 446 (1984) (citing Buchanan for the very proposition entailed in our case, but holding that Congress has abrogated immunity for the Postal Service).

Recognizing that sovereign immunity might put subcontractors in a bind--but unwilling to surrender its benefits--Congress enacted the Miller Act, 40 U.S.C. Sec. 270a-270d. General contractors on projects funded by the United States must post bonds to ensure full payment of subcontractors. Subcontractors must look exclusively to the general contractors (and the bonds) for payment. They cannot obtain liens on the federal projects and buildings, and they cannot collect directly from the Treasury. Arvanis v. Noslo Engineering Consultants, Inc., 739 F.2d 1287 (7th Cir.1984). Darla failed to comply...