Fid. & Guaranty Ins. Underwriters, Inc. v. United States

• Decision Date: 06 November 2015
• Docket Number: No. 2015–5036.,2015–5036.
• Citation: 805 F.3d 1082
• Parties: FIDELITY AND GUARANTY INSURANCE UNDERWRITERS, INC., United States Fidelity and Guaranty Company, Appellants v. UNITED STATES, Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

805 F.3d 1082

FIDELITY AND GUARANTY INSURANCE UNDERWRITERS, INC., United States Fidelity and Guaranty Company, Appellants

v.UNITED STATES, Appellee.

No. 2015–5036.

United States Court of Appeals, Federal Circuit.

Nov. 6, 2015.

Richard L. McConnell, Jr., Wiley Rein, LLP, Washington, DC, argued for appellants. Also represented by Brendan J. Morrissey, Bentonville, AR.

Lauren Moore, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC, argued for appellee. Also represented by Benjamin C. Mizer, Robert E. Kirschman, Jr., Deborah A. Bynum.

Before LOURIE, SCHALL, and LINN, Circuit Judges.

Opinion

SCHALL, Circuit Judge.

Fidelity and Guaranty Insurance Underwriters, Inc. and United States Fidelity and Guaranty Co. (collectively “USF & G”) appeal the decision of the United States Court of Federal Claims granting the government's motion to dismiss their amended complaint for lack of subject matter jurisdiction. Fid. & Guar. Ins. Underwriters v. United States, 119 Fed.Cl. 195 (2014).

USF & G filed suit in the Court of Federal Claims under the Tucker Act, 28 U.S.C. § 1491(a)(1), seeking reimbursement from the government for legal expenses and settlement costs it allegedly incurred in its capacity as general liability insurer for Gibbs Construction, L.L.C. f/k/a Gibbs Construction Co. (“Gibbs”), a government contractor. USF & G alleged that, in a contract for renovation work at the main post office in New Orleans, Louisiana, the United States Postal Service (“Postal Service”) agreed to indemnify Gibbs and its agents against any liability incurred as a result of asbestos removal work under the contract. USF & G alleged that the Postal Service breached that agreement when it failed to indemnify Gibbs in connection with a lawsuit filed against Gibbs by a former Postal Service police officer, in which the officer claimed that he contracted mesothelioma as a result of asbestos removal during performance of the contract. USF & G further alleged that, as Gibbs's general liability insurer, it had been required to litigate and settle the officer's claim after the government failed to indemnify Gibbs. USF & G asserted that the Court of Federal Claims had jurisdiction because USF & G was Gibbs's equitable subrogee. In granting the government's motion to dismiss, the court disagreed, holding that it lacked jurisdiction under a theory of equitable subrogation. We affirm.

Background

In deciding the government's motion to dismiss, the Court of Federal Claims was required to “accept as true all undisputed facts asserted in [USF & G's amended] complaint and draw all reasonable inferences in favor of [USF & G].” Trusted Integration, Inc. v. United States, 659 F.3d 1159, 1163 (Fed.Cir.2011). For purposes of its motion to dismiss, the government did not dispute the facts asserted by USF & G in the amended complaint. Thus, the amended complaint sets forth the uncontested factual backdrop for this appeal. We recite here the facts pertinent to the issue before us.

I.

In 1984, the Postal Service and Gibbs entered into a contract for the abatement of asbestos and for fireproofing at the main post office in New Orleans, Louisiana. Am. Compl. ¶ 5. As general contractor, Gibbs subcontracted the asbestos removal portion of the project to Laughlin–Thyssen, Inc. f/k/a Laughlin Development Co. (“LTI”). Id. ¶ 6. LTI purchased general liability insurance for the asbestos removal work under its subcontract with Gibbs. Id. ¶ 10.

In 1985, during the course of performance of the contract, and after delays caused by the Postal Service, LTI attempted to renew its general liability insurance, but the insurer would not renew the policy. Id. Because the cost of liability insurance had significantly increased, Gibbs contacted the Postal Service and requested additional compensation to cover the increased cost of completing the project. Id. ¶ 10–11. Eventually, instead of providing additional monetary compensation, the Postal Service proposed that the contract be amended to indemnify Gibbs for liability incurred as a result of any asbestos-related injury. Id. ¶ 12–14. The indemnification provision, which was set forth in a letter from the Postal Service to Gibbs, stated:

ASBESTOS REMOVAL/REPAIR LIABILITY

The Postal Service shall save harmless and indemnify the contractors and its officers, agents, representatives, and employees from all claims, loss damage, actions, causes of action expense and/or liability resulting from brought for or no account of any personal injury received or sustained by any person persons attributable to the asbestos' removal work performed under or related to this contract.

Id. ¶ 14 (typographical and grammatical errors in original).¹ Gibbs accepted the Postal Service's proposal by continuing work pursuant to the contract and finishing the project in June 1988. Id. ¶ 19. In the meantime, USF & G issued three general liability policies to Gibbs. The policies covered three consecutive, annual time periods, ranging from January 1, 1985, to January 1, 1988. Id. ¶ 17.

II.

In March 2010, Louis Wilson, a former Postal Service police officer, sued Gibbs and LTI, alleging that, between September 1984 and January 1988, he contracted mesothelioma as a result of asbestos removal work performed under the contract. Id. ¶ 20. On May 27, 2010, Gibbs demanded that the Postal Service defend against the suit and indemnify it, pursuant to the amendment to the contract. Id. ¶ 21. The Postal Service refused to do so, however. Id. ¶ 22. In due course, Gibbs and its insurers, including USF & G, settled with Mr. Wilson without the Postal Service's involvement. Id. ¶ 23. USF & G paid $1,031,250.00 to settle Mr. Wilson's claims and incurred an additional $529,333.34 in legal expenses. Id.

Gibbs thereafter sought reimbursement from the Postal Service for the settlement costs and legal expenses incurred by its insurers. Id. ¶ 24. On January 29, 2013, the contracting officer denied the claim. Id. ¶ 25. A year later, on January 29, 2014, USF & G filed a complaint against the government in the Court of Federal Claims, seeking to recover the settlement costs and legal expenses it had incurred in the lawsuit brought by Mr. Wilson. See Joint Appendix (“J.A.”) 11. Claiming jurisdiction under the Tucker Act, USF & G alleged a breach of contract. Am. Compl. ¶ 4.

III.

In due course, the government filed a motion to dismiss USF & G's amended complaint pursuant to Rule 12(b)(1) of the Court of Federal Claims. Mot. to Dismiss Am. Compl., Fid. & Guar. Ins. Underwriters, Inc. v. United States, No. 1:14–cv–00084–EDK (Fed.Cl. May 28, 2014), ECF No. 19. In its motion, the government contended that the Court of Federal Claims lacked jurisdiction to entertain USF & G's claim under the Tucker Act because of the absence of a contract between USF & G and the United States. Id. at 7. The government also argued that USF & G was not equitably subrogated to Gibbs, the prime contractor, and that the court therefore lacked subject matter jurisdiction under a theory of equitable subrogation. Id. at 7–8.

USF & G filed an opposition to the motion to dismiss, in which it argued that the Court of Federal Claims had jurisdiction because sovereign immunity is waived for suits by insurers as equitable subrogees and that USF & G qualified as Gibbs's equitable subrogee. Opp'n to Mot. to Dismiss Am. Compl. at 6–9, Fid. & Guar. Ins. Underwriters, Inc. v. United States,

No. 1:14–cv–00084–EDK (Fed.Cl. July 3, 2014), ECF No. 22. In its opposition, USF & G relied on the Supreme Court's decision in United States v. Aetna Casualty & Surety Co., 338 U.S. 366, 70 S.Ct. 207, 94 L.Ed. 171 (1949), and our decision in Insurance Co. of the West v. United States, 243 F.3d 1367 (Fed.Cir.2001) (“ICW ”). Id. In Aetna, the Court held that the Federal Tort Claims Act, 28 U.S.C. § 1346(b), authorizes insurers who pay the claims of those injured by the negligence of government employees to sue the United States as equitable subrogees. 338 U.S. at 380, 70 S.Ct. 207. USF & G argued that our decision in ICW , which involved a Miller Act surety² suing for breach of contract, “extended” the rationale for waiver of sovereign immunity articulated in Aetna to claims brought under the Tucker Act. Opp'n to Mot. to Dismiss at 7.

IV.

On November 19, 2014, the Court of Federal Claims granted the government's motion to dismiss. Fid. & Guar., 119 Fed.Cl. at 201. The court started from the premise that, “as a general matter, ‘[a] plaintiff must be in privity with the United States to have standing to sue the sovereign on a contract claim.’ ” Id. at 198 (alteration in original) (quoting S. Cal. Fed. Sav. & Loan Ass'n v. United States, 422 F.3d 1319, 1328 (Fed.Cir.2005) ). Because USF & G was not a party to a contract with the government, the court determined that USF & G had to demonstrate that its suit fell within one of several “limited exceptions” to the privity requirement. Id.

The Court of Federal Claims rejected USF & G's argument that it was entitled to sue under the Tucker Act because, while not in privity with the government, it was equitably subrogated to the claims of Gibbs against the Postal Service. The court stated:

While it is well established that a surety may bring suit against the United States under a theory of equitable subrogation, neither the Court of Federal Claims nor the Federal Circuit has ever recognized a waiver of sovereign immunity under the Tucker Act in a case like the present one, in which a general liability insurer invokes the doctrine of equitable subrogation to step into its insured's shoes for purposes of suing the government for breach of contract.

Id. at 198–99. The court explained that, while USF & G “analogize[d] its status to that of a Miller Act surety,” the analogy was incomplete because a Miller Act surety “step[s] into the shoes” of a contractor and assumes the contractor's performance obligations, whereas a general liability insurer does not.Id. at 198.

Finally, the Court of...