BROOKFIELD CONST. CO., INC. v. United States, 555-79C.

• Decision Date: 23 September 1981
• Docket Number: No. 555-79C.,555-79C.
• Parties: BROOKFIELD CONSTRUCTION CO., INC., and Baylor Construction Corp. (A Joint Venture) v. The UNITED STATES.
• Court: U.S. Claims Court

661 F.2d 159

BROOKFIELD CONSTRUCTION CO., INC., and Baylor Construction Corp. (A Joint Venture) v. The UNITED STATES.

No. 555-79C.

United States Court of Claims.

September 23, 1981.

Jon A. Kerr, Washington, D. C., atty. of record, for plaintiffs. Hudson, Creyke, Koehler, Tacke & Bixler, Washington, D. C., of counsel.

George M. Beasley, III, Washington, D. C., with whom was Acting Asst. Atty. Gen., Thomas S. Martin, Washington, D. C., for defendant. Raymond McCulloch, U. S. Army Corps of Engineers, of counsel.

James A. Pemberton, Jr., Washington, D. C., for amicus curiae, Associated General Contractors; King & King, Chartered, Washington, D. C., of counsel.

Before DAVIS, KASHIWA and SMITH, Judges.

ON CROSS-MOTIONS FOR SUMMARY JUDGMENT

DAVIS, Judge:

The Contract Disputes Act of 1978, Pub. L.No. 95-563, 92 Stat. 2383, 41 U.S.C. 601 et seq. (Supp. III, 1979) — in its summary transitional provision for the interim between, on the one hand, complete non-coverage by the new statute of government contracts, and, on the other, full prospective coverage for wholly new agreements made after the Act became law — presents numerous problems of interpretation.¹ These are transient, of course, but many of them are important for both contractors and Government. The present case falls into that class. It involves a pre-Act agreement and contract-claims filed with the contracting officer years before the March 1, 1979 effective date of the Act, but decided by the contracting officer after the Act went into operation. The several questions before us all concern interest on the claim-awards. The chief of these issues is whether a contractor which has elected to proceed under the Act may recover interest on its subsequently-allowed claims for periods of time prior to the effective date of the Act. We hold that the Act does not allow such retroactive interest, and that plaintiff's recovery is limited to simple, variable-rate interest running from the effective date of the Act (March 1, 1979) until December 13, 1979, the date of payment of the underlying claims.

I

The case is here on cross-motions for summary judgment, and the facts are not in dispute. Under the 1965 contract on which this action is based, plaintiff joint venture² agreed to construct a hurricane barrier for the United States Army Corps of Engineers for the fixed price of $8,083,075. During the course of construction (April 1965-October 1968) plaintiff experienced various changes, changed conditions and suspensions of work which eventually resulted in the submission of approximately 42 claims for equitable adjustments. Most of the claims were settled and paid, and modifications issued, before March 1, 1979. As of that date, no formal decision had been issued for seven claims. Oral agreement had been reached, however, on three of these claims before the March 1st effective date, but no final modification, memorandum of understanding, or other writing had been issued at that time due to an alleged lack of program funds to pay for the settlements. Final modifications settling all of the claims were executed in October 1979, and payment was made on December 13 of that year.

By letter of June 26, 1979, plaintiff's counsel informed defendant that it would seek interest under the Disputes Act on the amounts finally paid for all claims pending before the contracting officer on the March 1, 1979 effective date. The contract itself contained no interest provision.³ The statutory interest claim was denied by the contracting officer in a final decision of August 28, 1979. Plaintiff timely appealed this decision and elected to proceed at once to this court under the Disputes Act's "direct access" provision, 41 U.S.C. § 609(a)(1) (Supp. III 1979). A petition was filed here in December 1979, seeking interest only. These cross-motions for summary judgment followed.

II

There is no doubt (and it is conceded) that, at least as to four of its seven claims unpaid on March 1, 1979, Brookfield-Baylor had the statutory right to proceed under the Disputes Act. Those claims were fully outstanding on that date, and no contracting officer's decision of any kind was made until a later time. Section 16 of the Act provides that:

This Act shall apply to contracts entered into one hundred twenty days after the date of enactment November 1, 1978. Notwithstanding any provision in a contract made before the effective date of this Act March 1, 1979, the contractor may elect to proceed under this Act with respect to any claim pending then before the contracting officer or initiated thereafter. 41 U.S.C. § 601 (note).

On June 26, 1979, plaintiff made such an election.

We begin with the most significant question in the case — whether a pre-Act contractor properly electing to proceed under the Disputes Act is entitled to interest on those pre-Act claims from the time the claims were made to the contracting officer (before the Act became effective). For its affirmative answer, plaintiff rests, first, on the proposition that, once the Act is properly invoked by a pre-Act contractor on pre-Act claims, every provision of the Act must be applied to that contractor as if this were a post-Act contract, and, second, on the Act's specific provision giving interest on claims from the time when the contracting officer receives the claim pursuant to the Act (section 12 of the Disputes Act, 41 U.S.C. § 611).⁴

The first of these contentions has already been rejected outright by the court in the broad form plaintiff (and amicus) put it. In both Folk Construction Co. and Gregory Lumber Co., supra, note 1, we refused to apply the Act's certification requirements to pre-Act claims which the contractors properly brought here under the "direct access" part of the Act.⁵ Those rulings show that there can be no mechanical application of each and every provision of the Act to contractors who elect under section 16, supra. The purpose, scope, and meaning of the particular provision must be examined to see its reach and effect on pre-Act claims. That is what we did in Folk and Gregory, and what we must do here. This principle of specific examination is consistent with section 16, supra, which says no more than that the electing contractor "may elect to proceed" under the Act, and does not clamp down the precise application of any specific part of the Act to pre-Act claims or pre-Act contracts.

The inquiry then becomes one of the scope, meaning and reach of the Act's interest stipulation, section 12 (note 4, supra). Brookfield-Baylor invokes the "plain" language of the provision as decisively showing that, for electing contractors, interest goes back to the pre-Act time the contracting officer received the claim. But we do not find the language very helpful for the current problem. It has been said that, when section 12 declares that interest runs from the date the contracting officer receives the claims "pursuant to section 6(a)" (note 4, supra), this proves that interest cannot go back prior to March 1, 1979 because the whole Disputes Act, together with section 6(a), did not exist before then, and the contractor's pre-Act claims could not have been received "pursuant to section 6(a)." Woods Hole Oceanographic Institute v. United States, Civil Action 79-1514-MA, (D.Mass., Dec. 19, 1980), slip op. at 9. One need not accept this point as controlling the issue of pre-Act interest in order to acknowledge that the position does show that section 12 has a definite aura of ambiguity and is not "plain" on its face in plaintiff's favor.

Nor is plaintiff helped by the Act's legislative history. There is no indication that Congress ever recognized that the Act could be construed as imposing pre-Act interest liability — nor any indication to the contrary. The history is wholly silent on this point. See, generally, S.Rep.No. 95-1118, 95th Cong., 2d Sess., reprinted in 1978 U.S.Code Cong. & Ad.News 5235 (Senate Report). Congress clearly thought that contractors should be allowed interest prospectively, but there is no expression in the history bearing, one way or the other, on the retroactive imposition of interest for periods prior to the effective date of the statute. Everything that Congress had to say bearing on interest, in its reports and debates,⁶ could be the same, word for word, if the legislative intention had been to make interest awardable only for periods after the Act's effective date.

In these circumstances — almost no affirmative guidance from Congress on the issue — the weightiest factors, in our view, are these: (a) the very large liability that would be imposed on the Government, unacknowledged in the legislative history, for pre-Act statutory interest; (b) the objectives and purposes of the Act's interest provision; and (c) the traditional attitude cautioning against imposing nonconstitutional interest on the Government if the mandate is not clear.

It seems almost certain that the allowance of retroactive statutory interest (i. e. prior to March 1, 1979) would amount to a large additional sum.⁷ Plaintiff's claims go back to the 1960's and early (or middle) 1970's. It seeks upwards of one million dollars in interest, most of it for pre-Act periods. Defendant has given us an affidavit declaring that the Corps of Engineers, alone, had some $214 million in contract claims pending against it on March 31, 1979, and that the average age of those claims might be about 2 years.⁸ The Corps of Engineers is but one of many federal procurement agencies governed by the Disputes Act — and not the most important one — and we have no doubt that many of the other agencies would have comparable or greater back-logs, and a large liability for back-interest, if such interest were to be allowed.

The Supreme Court, however, has cautioned against "reading a statute to impose liability on the Federal Government, where `the liability would mount to great sums,' unless the words (or intent) are plain." Schellfeffer v. United...