Bianchi v. U.S.

• Citation: 475 F.3d 1268
• Decision Date: 29 January 2007
• Docket Number: No. 06-5042.,06-5042.
• Parties: Maurice L. BIANCHI, Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals for the Federal Circuit

475 F.3d 1268

Maurice L. BIANCHI, Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee.

No. 06-5042.

United States Court of Appeals, Federal Circuit.

January 29, 2007.

Scott Michael Cantor, Graziadei & Cantor, Ltd., of Las Vegas, NV, argued for plaintiff-appellant.

Timothy P. McIlmail, Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for defendant-appellee. With him on the brief were Peter D. Keisler, Assistant Attorney General; David M. Cohen, Director; and Donald E. Kinner, Assistant Director. Of counsel on the brief was Kathleen Hallam, Office of Counsel, Defense Supply Center, Philadelphia, of Philadelphia, PA.

Before BRYSON and PROST, Circuit Judges, and SARIS, District Judge.^*

PROST, Circuit Judge.

Plaintiff-Appellant, Maurice L. Bianchi, appeals the judgment of the United States Court of Federal Claims, which dismissed his suit for lack of subject matter jurisdiction. Bianchi v. United States, 68 Fed.Cl. 442 (2005). Because we hold that the court had jurisdiction over one of Bianchi's two claims, we affirm-in-part and reverse-in-part. With respect to the claim over which the court had jurisdiction, we remand with instructions to enter judgment in favor of the government.

I. BACKGROUND

This case has a long and tortuous history. In 1979 and 1980, the government awarded Bianchi three contracts to produce military clothing. To finance his performance of the contracts, Bianchi borrowed money from Bank of America (the "Bank") and assigned the proceeds and rights associated with each contract to the Bank as security for the loan. The Bank properly notified the government of its assignments under the Assignment of Claims Act. 31 U.S.C. § 3727; 41 U.S.C. § 15. Thereafter, the Bank received payments from the government of the money due under the contracts. In 1980 and 1981, the Bank loaned Bianchi additional money to fund performance of the contracts. These additional loans were guaranteed by the Small Business Administration ("SBA") and the collateral for the loans included a third lien on all receivables, including contract rights.

A dispute then arose between Bianchi and the government regarding Bianchi's performance under the contracts and the government terminated two of the contracts for default. Shortly thereafter, Bianchi defaulted on his loans from the Bank. The Bank applied to the SBA for payment on the guaranteed loans. In exchange for payment, the Bank assigned its interest in the guaranteed loans to the SBA.

In 1981, Bianchi brought a series of claims on the contracts before the Armed Services Board of Contract Appeals ("ASBCA"). In 1988, the government and Bianchi entered into an agreement to settle the ASBCA claims ("1988 settlement agreement"). The agreement provided, in pertinent part (emphases added):

The parties to the [ASBCA] appeals agree to stipulate to the following decision by the Board:

(1) The parties agree that Mr. Maurice Bianchi, as the successor to M Bianchi of California, is entitled to recover $617,500.00 on his claims in the following appeals: ASBCA Nos. 26362, 26363, 26364, 26365, 26366, 26505, 26506, 26513, 26642, 29932, 29933, and 29934; that the government is entitled to take nothing on its claims in the following appeals: ASBCA Nos. 26362, 26363, 26364, 26365, 26366, 26505, 26506, 26513, 26642, 29932, 29933, and 29934; that Mr. Bianchi is entitled to interest computed in accordance with Clauses L78 (Disputes (1979 MAR)) of the contracts, at the rates prescribed by the Secretary of the Treasury, under the Renegotiation Act, Public Law 92-41, on the principal amount of $617,500, such interest to run from June 19, 1981 until the date of payment; and that the parties waive their rights to seek reconsideration of this stipulated decision of the Board or to appeal that stipulated decision;

(2) This settlement is without prejudice to Mr. Bianchi's right to pursue any and all Value Engineering Change Proposal Claims under his contracts with DPSC; and

(3) This settlement is without prejudice to Mr. Bianchi's right to pursue an application under the Equal Access to Justice Act to recover whatever legal fees and litigation expenses to which he may be entitled in connection with these claims and appeals. The parties stipulate that the issues of prevailing party and substantial justification will be decided on the basis of the record made at the first trial. The parties agree that the application for legal fees and litigation expenses under the Equal Access to Justice Act will be submitted within thirty days of receipt by appellant of the agreed-upon settlement payment.

Except as noted, above, [Mr. Bianchi] and the government agree to stipulate to the dismissal of these appeals with prejudice.

The government paid Bianchi over $1.1 million pursuant to paragraph one of the 1988 settlement agreement ($617,500 plus interest from June 1981).

Two years later, the Bank filed suit against the government in the United States Claims Court arguing that, as Bianchi's contract assignee, it should have been paid the $1.1 million. The government, in turn, filed a third-party claim against Bianchi to recover the $1.1 million it had paid him. On appeal, this court held that the Bank, as Bianchi's contract assignee, was entitled be paid the amount awarded to Bianchi under the 1988 settlement agreement. Bank of Am. Nat'l Trust & Sav. Assoc. v. United States, 23 F.3d 380, 384 (Fed.Cir. 1994) ("Bianchi I"). The court further held that the SBA's security interests in the contracts were subordinate to the Bank's rights under the assignments, and that the Assignment of Claims Act prohibited the government from setting off Bianchi's debts to the SBA against the money owed to the Bank. Id. at 384-85.

With respect to the government's third-party complaint against Bianchi, the court acknowledged that the terms of the 1988 settlement agreement barred the government from challenging its settlement with Bianchi. Accordingly, the court held that the government could not recover by way of a third-party complaint the $1.1 million it paid Bianchi under paragraph one of the 1988 settlement agreement. Id. at 383-84 ("The government's right to recoup erroneously paid funds cannot be invoked by the government as a means to circumvent a legal obligation.").

Meanwhile, before the Bank sued the government, Bianchi pursued a claim for Equal Access to Justice Act ("EAJA") legal fees as permitted by paragraph three of the 1988 settlement agreement. In September 1990, the ASBCA awarded Bianchi $475,724.51 in EAJA fees. The government, however, refused to pay. As a result, Bianchi filed a complaint in the nature of a writ of mandamus in the United States District Court for the District of Nevada seeking to compel payment. The case was eventually appealed to the Ninth Circuit. Bianchi v. Perry, 140 F.3d 1294 (9th Cir. 1998) ("Bianchi II"). On appeal, the government argued that it was entitled to set off the mistaken payment to Bianchi against the award of EAJA legal fees. The Ninth Circuit disagreed, holding that the government could not attempt to recover the erroneously paid funds by way of a setoff against Bianchi's EAJA award. Id. at 1299.

In addition to pursuing EAJA legal fees, Bianchi also pursued Value Engineering Change Proposal ("VECP") claims under the contracts, as permitted by paragraph two of the 1988 settlement agreement. In February 1993, the ASBCA awarded Bianchi VECP royalties for one of the original contracts in the amount of $58,613.03 plus interest ("VECP I royalties"). Once again, Bianchi filed a complaint in the nature of a writ of mandamus in the District of Nevada seeking to compel payment by the government. The government interpleaded the Bank in order to avoid liability to both Bianchi and the Bank. The district court held that the Bank, as Bianchi's contract assignee, was entitled to the VECP I royalties, and the Ninth Circuit affirmed. Bianchi v. Walker, 163 F.3d 564 (9th Cir. 1998) ("Bianchi III"). Subsequently, the government paid the Bank $110,339.94 ($58,613.03 plus interest from November 1987).

One of Bianchi's arguments on appeal to the Ninth Circuit was that this court's holding in Bianchi I established that he was entitled to recover the VECP I royalties under the terms of the 1988 settlement agreement regardless of whether the government also owed those royalties to the Bank. The Ninth Circuit, however, held that the district court did not have jurisdiction to entertain this argument because it was, in essence, a breach of contract claim against the United States—the contract being the 1988 settlement agreement. Id. at 569 ("Because Bianchi seeks damages totaling more than $10,000 based on the [1988] settlement agreement, the complaint for a writ of mandamus should have been filed in the Court of Federal Claims.").

In December 2000, the ASBCA awarded Bianchi VECP royalties for a second of the original contracts in the amount of $16,574.74 plus interest ("VECP II royalties"). In June 2002, the government paid the Bank $44,807.02 ($16,574.74 plus interest from March 1988).

Bianchi filed this case in the Court of Federal Claims on March 18, 2004, alleging that he was entitled to payment of the VECP I and VECP II awards under the terms of the 1988 settlement agreement. Both sides moved for summary judgment. On October 31, 2005, the court dismissed the case for lack of subject matter jurisdiction. Bianchi, 68 Fed.Cl. at 468. Although the court acknowledged that a settlement agreement is a contract and that it has jurisdiction over a contract dispute between a citizen and the government, it nevertheless characterized Bianchi's suit as an improper attempt to enforce ASBCA awards in the Court of Federal Claims. Id. at 450. In addition, the court held that it lacked jurisdiction over Bianchi's claim for payment of the VECP I royalties because that claim was time-barred. Id. at 452. Finally, the court...