Patton Wrecking & Dem. Co. v. Tennessee Valley Auth.

• Decision Date: 08 September 1972
• Docket Number: No. 71-2363.,71-2363.
• Citation: 465 F.2d 1073
• Parties: PATTON WRECKING AND DEMOLITION CO., Inc., and Patton Bros., Inc., a joint venture, Plaintiffs-Appellees, v. TENNESSEE VALLEY AUTHORITY, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

465 F.2d 1073 (1972)

PATTON WRECKING AND DEMOLITION CO., Inc., and Patton Bros., Inc., a joint venture, Plaintiffs-Appellees, v. TENNESSEE VALLEY AUTHORITY, Defendant-Appellant.

No. 71-2363.

United States Court of Appeals, Fifth Circuit.

September 8, 1972.

Robert H. Marquis, Gen. Counsel, Tennessee Valley Authority, Thomas A. Pedersen, Sol., Charles W. Van Beke, Knoxville, Tenn., for defendant-appellant.

Clayton J. Swank, III, J. Murray Akers, Robertshaw, Merideth & Swank, Greenville, Miss., for plaintiffs-appellees.

Before JOHN R. BROWN, Chief Judge, and INGRAHAM and RONEY, Circuit Judges.

INGRAHAM, Circuit Judge:

The issue on this interlocutory appeal is whether a government contractor's suit for a declaratory judgment of the government's asserted anticipatory breach of contract was barred by virtue of the contractor's failure to exhaust the contractually established disputes procedure.

The contract, let after competitive bidding and inspection, was for the resurfacing of one of the Tennessee Valley Authority's dams. The bid invitation was based upon 2700 square feet of chipping and cleaning eroded concrete surfaces and 2700 cubic feet of drilling and setting steel anchors and placing concrete aggregate and intrusion grout. The unit price provided in the contract for each kind of work brought the total estimated contract amount to $197,100. While the contract allowed for upward adjustments of the cost of additional units of work, it was silent on decreases in quantities.

Appellee Patton Wrecking, the successful bidder, undertook and completed a substantial portion of the available work when it discovered that the total amount of work was far less than that specified (approximately 49% of the bid invitation quantity). Patton halted further performance and sought a declaratory judgment that the government's projected failure to supply adequate work constituted an anticipatory breach of contract freeing Patton from further performance on its part and entitling it to damages on the theory of quantum meruit. Tennessee Valley Authority answered and asserted Patton's failure to submit the dispute to the contracting officer under the contract's dispute clause.¹

The district court in an opinion reported as Patton Wrecking and Demolition Co., Inc. v. TVA, 324 F.Supp. 143 (N.D., Miss.1971) sustained Patton's complaint against TVA's motion to dismiss and motion for summary judgment. The district court certified TVA's interlocutory appeal and a panel of this court accepted that appeal. 28 U.S.C. § 1292(b). We reverse and remand.

The district court, after studiously tracing the development of the "standard" dispute clause,² found the dispute clause here at issue for clarity hereafter called "amended" or all disputes clause to be ambiguous in the scope of the jurisdiction that the parties had contractually conferred upon the contracting officer. The court, therefore, construed the amended dispute clause against its proponent TVA and pro tanto held that the dispute provision was inapplicable when the claim for anticipatory relief was not redressable under some other specific contract article. United States v. Utah Construction & Mining Co., 384 U.S. 394, 86 S.Ct. 1545, 16 L.Ed.2d 642 (1966).

The presence of a "standard" dispute clause in government contracts has a long history. See annotation, Government Contracts—"Dispute" Clause, 2 A.L.R.Fed. 691. In Edward R. Marden Corporation v. United States, 442 F.2d 364 (Ct.Cl., 1971), the court said:

"It is a familiar principle in the law of Government contracts that, to the extent complete relief is available under a specific provision of the contract, a controversy is regarded as being within the standard Disputes clause, i. e., as arising `under the contract.\' Such a controversy is susceptible of initial administrative resolution under the Disputes clause, and the administrative decision is subject to judicial review under the standards of the Wunderlich Act, 41 U.S.C. §§ 321, 322 (1964). Judicial review is strictly limited to the record established in the administrative proceedings. United States v. Carlo Bianchi & Co., 373 U.S. 709, 714, 83 S.Ct. 1409, 10 L.Ed. 2d 652 (1963). A corollary principle is that, to the extent complete relief is not made available under a specific contract provision, a controversy is not subject to administrative determination via the Disputes clause and may be tried de novo in the proper court. Len Co. & Assoc. v. United States, 385 F.2d 438, 442, 181 Ct.Cl. 29, 36 (1967)."

The role and meaning of the "standard" clause has been extensively considered by the Supreme Court in United States v. Utah, supra; United States v. Anthony Grace & Sons, 384 U.S. 424, 86 S.Ct. 1539, 16 L.Ed.2d 662 (1966) and Crown Coat Front Co. v. United States, 386 U. S. 503, 87 S.Ct. 1177, 18 L.Ed.2d 256 (1966). In Utah the Supreme Court distinguished between claims "arising under" the contract contract claims for which some other contractual article provided avenues for redress and breach of contract claims. In holding administrative remedies available only for contract claims, the Court said:

"Thus the settled construction of the disputes clause excludes breach of contract claims from its coverage, whether for purposes of granting relief or for purposes of making binding findings of fact that would be reviewable under Wunderlich Act standards rather than de novo. This is not to say that the Government does not have a powerful argument for construing the disputes clause to afford administrative relief for a wider spectrum of disputes arising between the contracting parties. It can be argued, as the Government persuasively does, that the same considerations which initially led to providing an administrative remedy in those situations covered by such clauses as Articles 3, 4 and 9 of the contract also support the broader reading of the disputes clause permitting and requiring administrative fact finding with respect to all disputes arising between the contracting parties. But the coverage of the disputes clause is a matter susceptible of contractual determination, United States v. Moorman, 338 U.S. 457, 70 S.Ct. 288, 94 L.Ed. 256, subject to the limitations on finality imposed by the Wunderlich Act, and one would have expected modification of the disputes clause to encompass breach of contract disputes if the restrictive interpretation of Article 15 was thought unduly to hinder government contracting. In fact the contracting departments have not rejected the narrower judicial reading of the disputes clause nor attempted any wholesale revision of its language to cover all factual disputes. Instead they have acted to create alternative administrative remedies for some breach of contract claims and to disestablish others by fashioning additional specific adjustment provisions contemplating relief under the contract in specified situations not reached by such provisions as Articles 3, 4 and 9."

United States v. Utah Construction & Mining Co., supra, 384 U.S. at 412-413, 86 S.Ct. at 1553. The primacy of the role of administrative resolution of contract claims through the dispute process requires that those remedies be exhausted before suit may be brought. The remedy, however, must be an available one, as the Supreme Court in United States v. Anthony Grace & Sons, supra, noted:

"There can be no doubt that the dispute here over the decision by the Department of the Air Force to cancel respondent\'s commitments under the bid and letter of acceptability and to retain the deposit is one which the parties contractually provided should be heard and decided by the administrative process. Barring some compelling policy reason to disregard this provision, the contractor should be held to its contractual agreement even at this stage in the litigation.

It is true that this Court has said on several occasions that the parties will not be required to exhaust the administrative procedure if it is shown by clear evidence that such procedure is `inadequate or unavailable.\' United States v. Joseph A. Holpuch Co., supra, 328 U.S. 234, at 240, 66 S.Ct. at 1003, 90 L.Ed. 1192; United States v. Blair, supra, 321 U.S. 730 at 736-737, 64 S.Ct. 823, 88 L.Ed. 1039. It may be that the contracting officer, H. B. Zachry Co. v. United States, 344 F.2d 352, 170 Ct.Cl. 115, or the Board of Contract Appeals, Southeastern Oil Florida, Inc. v. United States, 115 F.Supp. 198, 127 Ct.Cl. 480, so clearly reveals an unwillingness to act and to comply with the administrative procedures in the contract that the contractor or supplier is justified in concluding that those procedures have thereby become `unavailable.\' Similarly, there may be occasions when the lack of authority of either the contracting officer or the administrative appeals board is so apparent that the contractor or supplier may justifiably conclude that further administrative relief is `unavailable.\' But these circumstances are clearly the exceptions rather than the rule and the inadequacy or unavailability of administrative relief must clearly appear before a party is permitted to circumvent his own contractual agreement." 384 U.S. at 429, 86 S.Ct. at 1542.

This learning was succinctly restated in Crown Coat, supra:

"It is now crystal clear that the contractor must seek the relief provided for under the contract or be barred from any relief in the courts. In United States v. Joseph A. Holpuch Co., 328 U.S. 234, 66 S.Ct. 1000, 90 L. Ed. 1192, the question was whether a contractor\'s failure to exhaust the administrative appeal provisions of a government construction contract bars him from bringing suit in the Court of Claims to recover damages. The Court held that it did. According to the Court, the disputes clause

`is a clear, unambiguous provision applicable at all times and binding on all parties to the contract. No court is justified in disregarding its letter or spirit. . . . It creates a mechanism whereby adjustments may be

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