Northrop Grumman Computing Sys., Inc. v. United States

• Decision Date: 19 February 2013
• Docket Number: Nos. 2011–5124,2012–5044.,s. 2011–5124
• Parties: NORTHROP GRUMMAN COMPUTING SYSTEMS, INC., Plaintiff–Appellant, v. UNITED STATES, Defendant–Appellee. Northrop Grumman Computing Systems, Inc., Plaintiff–Appellant, v. United States, Defendant–Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

709 F.3d 1107

NORTHROP GRUMMAN COMPUTING SYSTEMS, INC., Plaintiff–Appellant,

v.UNITED STATES, Defendant–Appellee.

Northrop Grumman Computing Systems, Inc., Plaintiff–Appellant,

v.United States, Defendant–Appellee.

Nos. 2011–5124, 2012–5044.

United States Court of Appeals,Federal Circuit.

Feb. 19, 2013.

David C. Aisenberg, Looney Cohen & Aisenberg, LLP, of Boston, MA, argued for plaintiff-appellant in both appeals.

Amanda L. Tantum, Trial Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for defendant-appellee in both appeals. With her on the brief were Tony West, Assistant Attorney General, Jeanne E. Davidson, Director, Kirk T. Manhardt, Assistant Director, and Armando A. Rodriguez–Feo, Trial Attorney.

Before RADER, Chief Judge, PROST and REYNA, Circuit Judges.

REYNA, Circuit Judge.

Northrop Grumman Computing Systems, Inc. (“Northrop”) appeals two decisions of the Court of Federal Claims (“Northrop I ” and “Northrop II ”). Both appeals arise from a single contract between Northrop and U.S. Immigrations and Customs Enforcement (“ICE”) for the delivery of computer-network monitoring software. Because we find that the first claim letter Northrop filed with the contracting officer was a valid claim under the Contract Disputes Act (“CDA”), we reverse the Court of Federal Claims' decision in Northrop I and remand the case for further proceedings. We dismiss as moot Northrop's appeal in Northrop II.

I. Background

In July 2001, ICE awarded Northrop ¹ Contract No. NAS5–01143, which was a commercial items contract. Under this Contract, ICE awarded Delivery Order No. COW–4–D–1025 according to which Northrop would lease to ICE, and provide support for, network monitoring software produced by Oakley Networks (“Oakley”). The Delivery Order provided that Northrop would furnish the software and services via a lease for one twelve month base year and three twelve month option years. The base-year price was $900,000, and each option year was priced at $899,186. If the Government exercised all three option years, the Delivery Order would have a total value of $3,597,558. In the month that followed the Delivery Order award, ICE executed three modifications at Northrop's request. These modifications added clauses regarding Northrop's first-priority status, the Government's best efforts to secure funding, and a prohibition on the Government substituting comparable software for the Oakley software in the Northrop contract.

In order to obtain Oakley's software, Northrop was required to pay Oakley an up-front fee of $2,899,710. Four days after the Delivery Order award, ICE provided Northrop with an “essential use statement” that described the intended use of the Oakley software and was designed to facilitate third-party funding for the Oakley software. Thereafter, Northrop entered a private finance agreement with ESCgov, Inc. for the Oakley software. Under the terms of the financing agreement, ESCgov would pay Northrop $3,296,093 in exchange for Northrop's assignment to ESCgov of all payments received under the Delivery Order. ESCgov subsequently assigned its rights under the Northrop–ESCgov agreement to Citizens Leasing Corp. Neither Northrop, ESCgov, nor Citizens Leasing Corp. notified the Government of the assignments.

On September 30, 2005, ICE sent Northrop formal notification of its decision not to exercise the lease's first option year, which was to run from September 30, 2005 until September 29, 2006. Northrop responded on February 22, 2006 with a request for information regarding the Government's decision. On April 14, 2006, Northrop received a response from the contracting officer (“CO”), who emphasized that there was no “termination,” but that the Government simply was not in a position to fund the options due to lack of appropriations.

A. Northrop's First Claim ( Northrop I )

On September 21, 2006, Northrop sent to the CO a letter with the subject line “Contract Disputes Act Claim for not Exercising Option Year # 1 under COW–4–D–1025—Oakley Leasing Agreement.” Northrop notified the CO that the letter was submitted “[i]n accordance with the Contract Disputes Act of 1978, 41 U.S.C. 601 et seq., and the Disputes clause of the Contract.” ² Northrop asserted that the Government had breached the contract modifications made after the Delivery Order's award, and stated that the company was seeking $2,697,558.00 in damages. The letter did not mention the two private financing assignments. The letter concluded with a certification and a request for a final decision. On December 29, 2006, the CO issued a final decision denying Northrop's claim.

On August 20, 2007, Northrop filed a complaint before the Court of Federal Claims appealing the CO's decision. The Court of Federal Claims scheduled trial for June 13, 2011. Before trial, the Government learned of Northrop's private financing assignments and filed a motion to dismiss for lack of subject-matter jurisdiction on grounds that Northrop's letter was not a valid CDA claim. Specifically, the Government argued that Northrop's letter was not a valid claim because it failed to provide adequate notice of the nature of the claim, and because it did not reveal that Northrop's claim was for third-party losses of private funders. On June 15, 2011, the Court of Federal Claims issued its opinion in Northrop I granting the Government's motion to dismiss for lack of subject-matter jurisdiction. Northrop Grumman Computing Sys., Inc. v. United States, 99 Fed.Cl. 651, 660–61 (Fed.Cl.2011).

The Court of Federal Claims determined that it did not have jurisdiction because Northrop's September 21, 2006 claim letter to the CO did not constitute a valid CDA claim. The court reasoned that Northrop had not supplied the CO with “adequate notice” of the claim because it failed to “alert the contracting officer to the potential application of the Anti–Assignment Act and Severin doctrine [and] also to put him on notice as to the possible relevancy of a host of other issues that have been associated with sponsored or ‘pass-through’ claims.” Id. at 659. The court stated, “Based on that failure, the court must conclude that Northrop's ‘claim’ did not meet the requirements of the CDA, thereby depriving this court of jurisdiction over this lawsuit.” Id. at 660.

Northrop appealed the Court of Federal Claims' dismissal in Northrop I to our court.

B. Northrop's Second Claim ( Northrop II )

On July 20, 2011, while Northrop I was pending before the Court of Federal Claims, Northrop filed a second claim letter with the CO. Like the Northrop I letter, this letter also contained the subject line “Contract Disputes Act Claim for not Exercising Option Year # 1 under COW4–D–1025—Oakley Leasing Agreement.” The second claim letter contained much of the same content as the Northrop I claim letter, but also explained that “Northrop Grumman Computing financed this lease through various payments made by ESCGov [sic] and Citizens Leasing Corporation” and provided documents on the financing arrangements. Before the CO responded to Northrop's second claim letter, Northrop filed its notice of appeal to our court in Northrop I.

The CO determined that Northrop's second claim was the same claim pending before this court in Northrop I, and that as a result, he lacked authority to resolve Northrop's second claim:

Northrop's July 2011 claim arises from the same operative facts and is substantially the same claim as the claim it previously submitted to ICE dated September 21, 2006.... It is the Government's position that because the July 2011 Contract Disputes Act Claim for not exercising option year # 1 under COW–4–D–1025 is substantively the same claim as the one currently pending before the Federal Circuit on appeal under 28 U.S.C. § 516, only the Department of Justice possesses the authority to act.

The CO consequently declined to issue a final decision on Northrop's second claim.

Northrop appealed the CO's refusal to issue a decision on its second claim to the Court of Federal Claims. The Court of Federal Claims held that it lacked jurisdiction over Northrop's second complaint (Northrop II ). Northrop Grumman Computing Sys., Inc. v. United States, 101 Fed.Cl. 362, 365 (Fed.Cl.2011). In its decision, the court noted, “[Northrop's second] complaint asserts the same claim as [the Northrop I ] complaint that was dismissed by this court for lack of jurisdiction on June 23, 2011.” The court found that Northrop's pending appeal in Northrop I divested the CO of his authority to issue a final decision on Northrop's second claim. Without a valid final decision from the CO, the court concluded that it lacked jurisdiction over Northrop's second complaint.

Northrop appealed the Court of Federal Claims' dismissal in Northrop II to our court and we consolidated Northrop I and II. We have jurisdiction under 28 U.S.C. § 1295(a)(3).

II. Standard of Review

We review a grant or denial of a motion to dismiss for lack of subject-matter jurisdiction de novo. Hewlett–Packard Co. v. Acceleron LLC, 587 F.3d 1358, 1361 (Fed.Cir.2009). As both Northrop I and Northrop II were dismissed for lack of subject-matter jurisdiction, we review both dismissals de novo.

III. Northrop I

In Northrop I, the Court of Federal Claims concluded that Northrop's “claim” did not meet the requirements of a valid claim under the CDA. Specifically, the court explained that Northrop's failure to disclose information about its third-party financing arrangements deprived the CO of adequate notice of the basis of the claim because the claim failed to alert the contracting officer to the potential application of the Anti–Assignment Act, the Severin doctrine, and other issues associated with sponsored or “pass-through” claims. The court thus concluded that Northrop had not submitted a valid CDA claim to the CO, and accordingly, the court lacked subject-matter jurisdiction over the Northrop I complaint.

On appeal,...