Ains, Inc. v. U.S.

• Decision Date: 23 April 2004
• Docket Number: No. 03-5134.,03-5134.
• Citation: 365 F.3d 1333
• Parties: AINS, INC., Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

365 F.3d 1333

AINS, INC., Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee.

No. 03-5134.

United States Court of Appeals, Federal Circuit.

April 23, 2004.

COPYRIGHT MATERIAL OMITTED

Craig A. Holman, Holland & Knight, LLP, of Washington, DC, argued for plaintiff-appellant. With him on the brief was Kara L. Daniels.

Patricia M. McCarthy, Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for defendant-appellee. On the brief were Peter D. Keisler, Assistant Attorney General; David M. Cohen, Director; and Kyle E. Chadwick, Attorney. Of counsel on the brief was James L. Adler, Office of Chief Counsel, United States Mint, of Washington, DC.

Before BRYSON, GAJARSA, and PROST Circuit Judges.

GAJARSA, Circuit Judge.

AINS, Inc. ("AINS") appeals the United States Court of Federal Claims' May 23, 2003 dismissal for lack of subject matter jurisdiction of AINS's claim that the United States Mint ("Mint") had breached its contract with AINS. AINS, Inc. v. United States, 56 Fed. Cl. 522 (2003). We find that the Court of Federal Claims correctly determined that the Mint is a "non-appropriated funds instrumentality" ("NAFI"). Because Congress has not waived sovereign immunity to allow breach of contract suits against NAFIs other than in a few statutorily enumerated exceptions, and because the Mint is not among those exceptions, we affirm.

BACKGROUND

The Mint awarded AINS a contract to provide various information technology and computing support services to the Mint on or about April 10, 1997. This contract outlined not only AINS's obligations to the Mint, but also the Mint's obligations to AINS. On April 17, 2002, AINS brought the present suit alleging that the Mint had breached several of those contractual obligations. AINS asserted that jurisdiction was proper under the Tucker Act, which waives sovereign immunity to allow private parties to sue the United States for breach of contract. 28 U.S.C. § 1491(a)(1) (2000) ("The United States Court of Federal Claims shall have jurisdiction to render judgment upon any claim against the United States founded ... upon any express or implied contract with the United States ..."). The government moved to dismiss AINS's complaint for lack of subject matter jurisdiction, arguing that the United States has not waived its sovereign immunity to allow such suits against the Mint.

The factual allegations surrounding AINS's claim are not pertinent to this appeal because the Court of Federal Claims granted the government's motion and dismissed AINS's claim for lack of subject matter jurisdiction. The basis of the government's assertion of sovereign immunity, which the Court of Federal Claims accepted, is the NAFI doctrine, an established exception to the Tucker Act. The NAFI doctrine is based on the premise that the government has never waived its sovereign immunity to allow private parties to bring breach of contract claims against NAFIs. As a result, the Tucker Act does not provide the Court of Federal Claims with subject matter jurisdiction to hear suits against NAFIs.

The government asserts that the Mint became a NAFI in 1995, when Congress enacted 31 U.S.C. § 5136, creating the Mint's "Public Enterprise Fund." The government asserts that under this statute, the Mint must fund all of its operations with revenues derived solely from its own activities, not by drawing upon appropriated funds — a defining feature of a NAFI. The government further contends that Section 5136 demonstrates a firm indication by Congress that it intended to absolve the United States (i.e., the general fund) from liability for the Mint's actions — a second defining feature of a NAFI.

In response, AINS contends that the Mint is not a NAFI, relying in part on MDB Communications, Inc. v. United States, 53 Fed. Cl. 245 (2002), where, in fact, the Court of Federal Claims held that the United States Mint is not a NAFI. According to AINS, the Mint is not a NAFI because: (1) the Mint operates on a "continuous appropriation;" (2) Congress never expressed a firm intent to separate the Mint's activities from the general fund; and (3) Congress never sought to absolve the U.S. from liability for acts of the Mint. These points are among the considerations relevant to determining which government instrumentalities are NAFIs.

The Court of Federal Claims in the present case disagreed with the previous holding in MDB.¹ The Court of Federal Claims presented a well researched and well drafted review of the history of the NAFI doctrine, and assembled a coherent interpretation of the doctrine's sometimes confusing development in case law. The Court of Federal Claims then applied its analysis to rule that the Mint is a NAFI, and consequently to dismiss AINS's complaint for lack of subject matter jurisdiction. AINS timely appealed. We have jurisdiction to hear this appeal under 28 U.S.C. § 1295(a)(3).

DISCUSSION

A. Standard of Review

Whether the Court of Federal Claims properly dismissed AINS's complaint for lack of jurisdiction is a question of law that we review de novo. Core Concepts of Fla., Inc. v. United States, 327 F.3d 1331, 1334 (Fed.Cir.2003). Absent some specific statutory provision to the contrary, the Court of Federal Claims lacks jurisdiction over actions in which appropriated funds cannot be obligated. Id.; Furash & Co. v. United States, 252 F.3d 1336, 1339 (Fed.Cir.2001); L'Enfant Plaza Props., Inc. v. United States, 229 Ct.Cl. 278, 668 F.2d 1211, 1212 (1982). We therefore review de novo the Court of Federal Claims' ruling that the Mint is a NAFI.

B. Development of the NAFI Doctrine

The Court of Federal Claims presented an excellent discourse on the historical development of both NAFIs and the NAFI doctrine, which we draw upon liberally in our own review of the relevant history. The sine qua non of all NAFIs is apparent in their name: they do not receive appropriated funds. As a result, all NAFIs are government "instrumentalities" that are at least essentially self-supporting. Both the formal legal definition of NAFIs and the implications of the Tucker Act's inapplicability to government agencies that meet that definition, however, are somewhat more complicated.

The first historically recorded NAFI in the United States was a self-supporting post fund that Army officers administered to aid indigent widows and children of deceased Civil War soldiers. Congress expanded upon this idea to develop a system of "post exchanges" (PXs), which the Army regulates and operates as profit making ventures. After World War II, Congress expanded the idea of self-supporting agencies even further, and NAFIs began to appear throughout the civilian sector.

The NAFI doctrine, as it relates to the Court of Federal Claims and to jurisdiction under the Tucker Act, began to develop following Standard Oil Company of California v. Johnson, 316 U.S. 481, 484-85, 62 S.Ct. 1168, 86 L.Ed. 1611 (1942). In Standard Oil, the Supreme Court ruled that PXs qualified for a federal government exemption from a California motor vehicle fuel tax. Id. According to the Court, "post exchanges as now operated are arms of the Government deemed by it essential for the performance of governmental functions," though the "government assumes none of the financial obligations of the exchange." Id. at 485, 62 S.Ct. 1168.

In other words, Standard Oil recognized the existence of "government agencies" for which the government had not accepted financial responsibility. Standard Oil did not address the questions of liability and/or of sovereign immunity as applied to such "agencies." Shortly thereafter, however, the Court of Claims opined that its jurisdiction under the Tucker Act was limited to claims against the general fund, or more specifically, to claims against government instrumentalities whose judgments could be paid from appropriated funds. The Court of Claims reasoned that when the government assumed no liability for a federal entity, the government could not be said to have consented to suit against that entity — and that the Tucker Act consequently provided the Claims Court with no jurisdiction to hear complaints against these entities. NAFIs therefore retain their sovereign immunity from suit for breaches of contract that Congress waived with respect to government agencies funded by appropriations from the general fund. See, e.g., Borden v. United States, 126 Ct.Cl. 902, 116 F.Supp. 873 (1953); Pulaski Cab Co. v. United States, 141 Ct.Cl. 160, 157 F.Supp. 955 (1958); Kyer v. United States, 177 Ct.Cl. 747, 369 F.2d 714 (1966).

It appears that Standard Oil did not compel this result. The early cases articulating the doctrine that NAFIs retained sovereign immunity met with spirited insistence that the doctrine emerged from an erroneous interpretation of Standard Oil. See, e.g., Borden, 116 F.Supp. at 878-80 (Whitaker, J., dissenting); Pulaski Cab Co., 157 F.Supp. at 958 (Whitaker, J., concurring). In the Court of Claims' first significant NAFI doctrine case, Borden was an accountant employed by an Army PX under contract with the PX. Borden, 116 F.Supp. at 873. Someone stole payroll funds from Borden's office, and some of these funds were never recovered. The PX withheld an amount equal to its loss from Borden's salary, alleging that his negligence had caused the loss. Borden sued the United States to recover his withheld salary. The court recognized that this case presented an anomaly because Borden seemed to have no avenue along which to seek redress of his claims. Id. at 876. He could not sue the PX, with whom he had a contract, because it was an arm of the government. And "in the light of [Standard Oil] ... [the court] reluctantly reach[ed] the conclusion that plaintiff c[ould] not sue the United States on a contract of employment which is signed by the Army Exchange Service, European Theater." Id. at 877. In dissent, Judge Whitaker complained that

[t]he majority recognize...