U.S. v. McDonnell Douglas Corp., 83-2119

• Citation: 751 F.2d 220
• Decision Date: 19 December 1984
• Docket Number: No. 83-2119,83-2119
• Parties: UNITED STATES of America and Charles A. Bowsher, Comptroller General of the United States of America, v. McDONNELL DOUGLAS CORPORATION, Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

Page 220

751 F.2d 220

UNITED STATES of America and Charles A. Bowsher, Comptroller General of the United States of America, v. McDONNELL DOUGLAS CORPORATION, Appellant.

No. 83-2119.

United States Court of Appeals,

Eighth Circuit.

Submitted May 16, 1984.

Decided Dec. 19, 1984.

Gary T. Carr, St. Louis, Mo., for appellant.

Stuart A. Licht, JD, Washington, D.C., for appellee.

Before LAY, Chief Judge, FLOYD R. GIBSON, Senior Circuit Judge, and FAGG, Circuit Judge.

FAGG, Circuit Judge.

This is an appeal by McDonnell Douglas Corporation (MDC) from a district court order directing it to produce certain documents subpoenaed by the Comptroller General of the United States (CG). After a careful review, we affirm.

I. Background

In 1976 the United States Air Force entered into a contract with MDC for the purchase of aircraft ultimately destined for the Republic of Korea. The negotiated contract price of over $80,000,000 was arrived at on the basis of MDC's cost projections plus a profit equal to 18% of the contract price.

In 1978, General Accounting Office (GAO) auditors initiated a review of the contract as part of a study of Department of Defense (DOD) procedures for awarding major procurement contracts. GAO auditors discovered that MDC's cost projections for tooling and design engineering costs were far above the actual costs incurred in completing the contract. As a result, MDC's profit amounted to 42% of the contract price rather than the contemplated 18%.

During the course of further investigations, GAO auditors were informed by MDC representatives that MDC's manufacturing division had prepared for in-house use an estimate of the tooling hours required in manufacturing the aircraft. Believing that any in-house estimates of tooling and design engineering costs would be useful in discovering whether MDC was aware that it had misrepresented its projected costs to the Air Force, GAO auditors submitted a written demand for the in-house documents in September of 1978.

After negotiations between the CG and MDC proved unproductive, the CG served MDC with a subpoena for the documents in March of 1981. The CG's subpoena enforcement proceeding was dismissed without prejudice in December of that year. 93 F.R.D. 360 (Mo.1981). In January of 1982, the CG again served MDC with a subpoena for the documents, and upon noncompliance with the subpoena, the CG commenced this action in district court. MDC then filed a notice of appeal with the Armed Services Board of Contract Appeals (ASBCA) contesting the CG's subpoena. The ASBCA dismissed MDC's appeal as premature because MDC had failed to present its dispute to the Contracting Officer, as required by the Contract Disputes Act of 1978, before seeking relief from the ASBCA.

MDC filed several motions opposing enforcement of the subpoena. In July of 1983, however, the district court ordered MDC to produce the subpoenaed documents. It further ordered that execution of the order to produce be stayed pending resolution of this appeal. MDC challenges the district court's order to produce on several grounds.

II. Jurisdiction

MDC contends that the district court was without jurisdiction to decide this case. It is MDC's position that the Contract Disputes Act of 1978, 41 U.S.C. Sec. 601 et seq., gives exclusive jurisdiction over this matter to the ASBCA. According to MDC, if this court finds the ASBCA to be without exclusive jurisdiction, we should invoke the doctrine of primary jurisdiction in favor of the ASBCA. Finally, MDC argues that 31 U.S.C. Sec. 54(c) (Supp. IV 1980) (recodified at 31 U.S.C. Sec. 716(c) (1982)), which grants the CG a narrow subpoena power and the right to seek enforcement of that power in district court, violates the constitutional doctrine of Separation of Powers.

A. Exclusive Jurisdiction

"[T]he Comptroller General may require by subpoena the production of books, records, correspondence, memoranda, papers, and documents of contractors * * * to which he has access by law or by agreement of the non-Federal person from whom access is sought." 31 U.S.C. Sec. 54(c)(1) (Supp. IV 1980). The CG claims access to the documents subpoenaed by virtue of an access to records clause (access clause) included in the parties' contract. The access clause provides:

The Contractor agrees that the Comptroller General of the United States or any of his duly authorized representatives shall, until the expiration of three years after final payment under this contract * * *, have access to and the right to examine any directly pertinent books, documents, papers, and records of the Contractor involving transactions related to this contract.

MDC argues that, assuming the constitutionality of the subpoena enforcement power granted the CG under section 54(c), the CG must establish a right of access to the documents subpoenaed. The access clause incorporated in the parties' contract provides the CG access to "directly pertinent" records involving transactions relating to the contract. MDC argues that whether the documents subpoenaed are documents falling within the "directly pertinent" language of the access clause is a legitimate contract dispute over the proper interpretation of the access clause. According to MDC, exclusive jurisdiction for resolving this contract dispute is vested in the ASBCA. We cannot agree.

The Contract Disputes Act of 1978 provides a comprehensive statutory system of remedies for resolving government contract disputes. The Act applies "to any express or implied contract * * * entered into by an executive agency for--(1) the procurement of property." 41 U.S.C. Sec. 602(a)(1). We need not decide the applicability of the Contract Disputes Act to the contract entered into by MDC and the Air Force for the procurement of aircraft for the Republic of Korea. The mere existence of the Contract Disputes Act does not alter the authority granted the district court in section 54(c)(2) of the General Accounting Office Act of 1980 to enforce subpoenas issued by the CG under section 54(c)(1). The power to enforce a subpoena issued under section 54(c)(1) necessarily carries with it the power to determine if enforcement is proper. In this regard, the district court must determine, among other things, whether the subpoena was issued for a lawful purpose and requests information relevant to that lawful purpose. Oklahoma Press Publishing Co. v. Walling, 327 U.S. 186, 208-09, 66 S.Ct. 494, 505-06, 90 L.Ed. 614 (1946). A determination as to whether the subpoena requests information relevant to the lawful purpose for which it was issued requires the district court to interpret the scope of the access clause of the contract. We disagree with MDC's contention that the Contract Disputes Act of 1978 precludes the district court from interpreting the proper scope of the access clause under the authority of 31 U.S.C. Sec. 54(c)(2) (Supp. IV 1980).

B. Primary Jurisdiction

MDC argues that the question of whether the documents subpoenaed are documents falling within the reach of the access clause of the contract is a matter within the special expertise of the ASBCA. Accordingly, MDC asks that we vacate the judgment of the district court and reverse its denial of MDC's motion to dismiss or stay these proceedings pending resolution of MDC's appeal from the decision of the ASBCA to the Federal Circuit. The Federal Circuit, however, has stayed the proceedings before it pending the outcome of this appeal. We decline to grant the relief requested by MDC.

The doctrine of primary jurisdiction is a flexible tool used to allocate "business between court and agency, and should seldom be invoked unless a factual question requires both expert consideration and uniformity of resolution." Locust Cartage Co. v. Transamerican Freight Lines, Inc., 430 F.2d 334, 340 n. 5 (1st Cir.1970), cert. denied, 400 U.S. 964, 91 S.Ct. 365, 27 L.Ed.2d 383 (1971). A court "should be reluctant to invoke the doctrine of primary jurisdiction, which often, but not always, results in added expense and delay to the litigants where the nature of the action deems the application of the doctrine inappropriate." Mississippi Power & Light Co. v. United Gas Pipe Line Co., 532 F.2d 412, 419 (5th Cir.1976), cert. denied, 429 U.S. 1094, 97 S.Ct. 1109, 51 L.Ed.2d 541 (1977). "In every case the question is whether the reasons for the existence of the doctrine are present and whether the purposes it serves will be aided by its application in the particular litigation." United States v. Western Pacific Railroad, 352 U.S. 59, 64, 77 S.Ct. 161, 165, 1 L.Ed.2d 126 (1956). It is inappropriate to invoke the doctrine of primary jurisdiction in a case in which Congress, by statute, has decided that the courts should consider the issue in the first instance. Mississippi Power & Light Co., 532 F.2d at 419. This is such a case. Congress, in legislating section 54(c)(2), specifically entrusted the district courts with enforcement of subpoenas issued under the authority of section 54(c)(1). As previously stated, an enforcement decision under section 54(c)(2) necessitates interpreting the scope of the access clause of the parties' contract.

C. Separation of Powers Doctrine

If a party refuses to comply with a subpoena issued under the authority of section 54(c)(1), the CG is authorized to initiate a subpoena enforcement proceeding in district court. 31 U.S.C. Sec. 54(c)(2) (Supp. IV 1980). MDC contends that the initiation of lawsuits to effectuate the enforcement of legal rights and duties through the courts constitutes execution of the laws of the United States. Under the Constitution, the power and discretion to execute the laws is lodged solely with the executive branch. Springer v. Philippine Islands, 277 U.S. 189, 201-02, 48 S.Ct. 480, 482, 72 L.Ed. 845 (1928). Because the CG is an agent of the legislative rather than the executive branch of government, MDC argues that the authority granted the CG under section 54(c)(2) violates the...