Butz Engineering Corporation v. United States, 223-73.

• Citation: 204 Ct. Cl. 561,499 F.2d 619
• Decision Date: 19 June 1974
• Docket Number: No. 223-73.,223-73.
• Parties: BUTZ ENGINEERING CORPORATION v. The UNITED STATES.
• Court: Court of Federal Claims

204 Ct. Cl. 561, 499 F.2d 619 (1974)

BUTZ ENGINEERING CORPORATION v. The UNITED STATES.

No. 223-73.

United States Court of Claims.

June 19, 1974.

Marion Edwyn Harrison, Washington, D. C., attorney of record for plaintiff. Harrison, Lucey, Sagle & Salter, Washington, D. C., of counsel.

Carl Eardley, Sp. Asst. Atty. Gen., with whom was Acting Asst. Atty. Gen. Irving Jaffe, for defendant.

Before COWEN, Chief Judge, and DAVIS, SKELTON, NICHOLS, KASHIWA, KUNZIG and BENNETT, Judges.

ON DEFENDANT'S MOTION TO DISMISS OR ALTERNATIVE MOTION FOR SUMMARY JUDGMENT, AND PLAINTIFF'S CROSS-MOTION FOR SUMMARY JUDGMENT

KUNZIG, Judge.

In this contract claim, the court faces the first test of its jurisdiction over disputes arising from the operation of the United States Postal Service (USPS). While we hold that we have jurisdiction to entertain plaintiff's suit against the United States for breach of a USPS contract, we conclude that the claim fails on the merits. Accordingly, we grant summary judgment to defendant.

Facts

USPS was created as an "independent establishment of the executive branch of the Government of the United States" to replace the former Post Office Department (POD) by the Postal Reorganization Act of 1970 (the Reorganization Act). Pub.L. 91-375, Aug. 12, 1970, 84 Stat. 719.¹ The Reorganization Act, which totally revised and reenacted Title 39 of the U.S. Code, became fully effective July 1, 1971. The dispute at bar derives from a 1971 Postal Service contract for the modernization of the Morgan Station Post Office in New York City.

The advertisement for bids contemplated a two-phase contract, phase one covering design and phase two fabrication and installation. Two competing contractors were initially to be awarded identical contracts and allowed to perform phase I. USPS would then evaluate the two designs for technical merit and cost and scheduling requirements, and would presumably allow one contractor to proceed with performance of phase II.

On August 20, 1971, plaintiff entered into Postal Service contract REC 59-72 for phase I of the Morgan Station project. On or about the same date, the Jervis B. Webb Company (Webb) was awarded a virtually identical agreement on the same project. Although both contractors completed timely performance of this competitive phase covering design, USPS ultimately decided not to permit either to proceed with performance of phase II. This development resulted from a decision taken late in the phase I process that the Morgan Station be devoted to letter mail service alone, rather than serve as an all-purpose plant. The project was accordingly turned over to the Corps of Engineers, which did not utilize either contractor's design.

Alleging breach of contract, plaintiff sues for profits anticipated from performance of phase II, and for unreimbursed phase I costs. Defendant moves to dismiss the petition on the ground that this court lacks jurisdiction over USPS contract claims, or alternatively for summary judgment on the merits. Plaintiff has cross-moved for summary judgment on the merits. For the reasons advanced in the sections which follow, defendant's motion to dismiss is denied² while that for summary judgment is granted.

Jurisdiction

While drawing on specific provisions of the Reorganization Act, defendant's motion to dismiss is premised largely on the theory that, in replacing the POD with USPS, Congress created a public service which was to be self-supporting and liable for its own contractual obligations. Although conceding the Postal Service was founded to serve a public purpose and functions as an instrumentality of the Federal Government, defendant asserts the Reorganization Act requires the present contract claim to be brought against USPS in a federal district court. Plaintiff's petition champions the view that, while USPS may represent a "new breed of governmental animal," its obligations fall within the definition of "any express or implied contract with the United States" in this court's general jurisdictional statute. 28 U.S.C. § 1491 (Supp. II 1972). We assess these contending claims in the light of both the relevant case law and specific provisions of the Reorganization Act.

The Case Law

At hand is not the question of whether, when sued in its own name, USPS may claim the sovereign immunity of its parent government. That general question of agency law, once controversial, has basically been answered in the negative. Keifer & Keifer v. RFC, 306 U.S. 381, 388-389, 392, 394, 59 S.Ct. 516, 83 L.Ed. 784 (1939). Moreover, the Reorganization Act specifically authorizes USPS to "sue and be sued in its official name." 39 U.S.C. § 401(1). Our problem is instead the converse, continuing one of whether USPS numbers among those subsidiary instrumentalities for whose actions the United States, as principal, has renounced its own immunity.

Judicial efforts to define the scope of defendant's liability for the actions of the legion of federal agencies and corporations spawned by the needs of the modern welfare state reach back at least a half century. Early recognition of defendant's liability in a principal capacity employed the rough formula that the subsidiary instrumentality was "acting or professing to act, mediately or immediately, under the authority of the United States." Ex parte Skinner & Eddy Corp., 265 U.S. 86, 95, 44 S.Ct. 446, 448, 68 L.Ed. 912 (1924). Developing on this view, the Supreme Court more recently remarked:

That the Congress chose to call it a corporation does not alter its characteristics so as to make it something other than what it actually is, an agency selected by the Government to accomplish purely Governmental purposes.

Cherry Cotton Mills, Inc. v. United States, 327 U.S. 536, 539, 66 S.Ct. 729, 730, 90 L.Ed. 835 (1946).

In applying this theory as a basis for its jurisdiction, this court has emphasized that the contract at bar need not expressly describe defendant's capacity as principal since "the statutes and the purpose for which the Government corporation was organized disclosed the agency" relationship. John Morrell & Co. v. United States, 89 Ct.Cl. 167, 169 (1939). See also National Cored Forgings Co. v. United States, 132 F.Supp. 454, 458-459, 132 Ct.Cl. 11, 18-19 (1955).

Most recent and instructive of this line of decisions is National State Bank of Newark v. United States, 357 F.2d 704, 174 Ct.Cl. 872 (1966), a case involving a contractual undertaking of the Federal Housing Administration in which the court construed the Tucker Act to constitute a "broad" waiver of sovereign immunity by the United States. The key to the Newark holding was that, when a federal instrumentality acts within its statutory authority to carry out defendant's purposes, the United States submits itself to liability under the Tucker Act unless "some specific provision to the contrary" exists. 357 F.2d at 707, 174 Ct.Cl. at 877.³ In common-sense terms, the object in all such jurisdictional disputes is to determine if the agency in question is "doing work of the government." 357 F.2d at 708, 174 Ct.Cl. at 879. See Keifer & Keifer v. RFC, supra, 306 U.S. at 389, 59 S.Ct. 516. We may, then, fairly summarize that, where the agency whose operations are in dispute concededly functions as an instrumentality of the Federal Government, the burden is on defendant to demonstrate that this court is without jurisdiction to hear the claim.⁴

While jurisdiction under the Tucker Act over USPS activities has not been litigated prior to this suit, the case law concerning the relationship between USPS and defendant in other frameworks is largely inconclusive. Compare Detroit Window Cleaners Local 139 Insurance Fund v. Griffin, 345 F.Supp. 1343 (E.D.Mich.1972), and Lawhorn v. Lawhorn, 351 F.Supp. 1399 (S.D.W.Va. 1972), with White v. Bloomberg, 345 F. Supp. 133 (D.Md.1972), and Leonard v. United States Postal Service, 360 F. Supp. 449 (D.Mass.1973), aff'd 489 F.2d 814 (1st Cir. 1974). Thus, meaningful application of our jurisdictional formulae to the present case requires, as defendant urges, consideration of the statutory provisions at hand.

The Reorganization Act

No compelling indication of Congressional intent concerning defendant's role as principal to the actions of USPS emerges from the Reorganization Act's specific provisions. The statutory pattern is sufficiently clear, however, to demonstrate that defendant has failed to carry its burden of proving, under the circumstances, the United States is not an appropriate party to this suit.

Defendant relies too heavily on the theoretical postulate that Congress' design to establish the Postal Service on a self-supporting basis as an efficient business, see 39 U.S.C. §§ 2002, 2003, 2005, 3621, cast USPS totally out of its predecessor's niche in the federal establishment. To begin with, the premise is a dubious one. Congress has wide discretion to endow a governmental agency with any combination of powers and immunities as it sees fit. See FHA v. Burr, 309 U.S. 242, 244, 60 S.Ct. 488, 84 L.Ed. 724 (1940); Monolith Portland Midwest Co. v. RFC, 178 F.2d 854, 858 (9th Cir. 1949), cert. denied, 339 U.S. 932, 70 S.Ct. 668, 94 L.Ed. 1352 (1950). Whether a governmental corporation, agency, or other type of instrumentality is administered by sound commercial practices or as a bureaucratic boondoggle need not affect the legal status of the entity.

The relevant legislative history indicates that, while Congress was basically concerned with reorienting national postal service on a basis of greater efficiency and self-sufficiency, it in no way intended to strip an overhauled POD of its public service character. Nowhere is mention made of decreased legal responsibility of the United States as a result of postal service revision. Express purposes for reform included (1) reducing political pressure in order to inspire a more business-like approach to postal service; (2) providing a framework for collective bargaining by...