Coco Bros., Inc. v. Pierce

• Decision Date: 08 June 1984
• Docket Number: No. 83-5797,83-5797
• Parties: 32 Cont.Cas.Fed. (CCH) 72,809 COCO BROTHERS, INC., Appellant, v. Samuel PIERCE, Secretary of U.S. Department of Housing and Urban Development, and the Allegheny County Housing Authority, Appellees. . Submitted under Third Circuit Rule 12(6)
• Court: U.S. Court of Appeals — Third Circuit

Page 675

741 F.2d 675

32 Cont.Cas.Fed. (CCH) 72,809

COCO BROTHERS, INC., Appellant, v. Samuel PIERCE, Secretary of U.S. Department of Housing and Urban Development, and the Allegheny County

Housing Authority, Appellees.

No. 83-5797.

United States Court of Appeals, Third Circuit.

Submitted under Third Circuit Rule 12(6)

June 8, 1984.

Decided Aug. 27, 1984.

Maurice A. Nernberg, Jr., James R. Cooney, Nernberg & Laffey, Pittsburgh, Pa., for appellant.

Melvin L. Vatz, Pittsburgh, Pa., for appellee, Allegheny County Housing Authority.

J. Alan Johnson, U.S. Atty., Paul J. Brysh, Asst. U.S. Atty., Pittsburgh, Pa., for appellee, Samuel Pierce.

Before WEIS and BECKER, Circuit Judges, and ACKERMAN, District Judge. ^*

OPINION OF THE COURT

WEIS, Circuit Judge.

In this government contract case, the district court denied a preliminary injunction requested by a disappointed bidder. The suit was brought after another builder was selected but before a contract was executed. Whether the dispute is viewed as a pre or post-award case, we hold that the United States Claims Court is not the exclusive forum and the district court had jurisdiction. Concluding that on the merits the plaintiff failed to show illegality or irrationality in the defendants' decision, we will affirm the district court's order.

Plaintiff contractor sought declaratory relief and an order enjoining defendants from awarding a housing construction contract to another builder. The district court concluded that plaintiff failed to show irreparable harm and denied the preliminary injunction.

The Allegheny County Housing Authority, in conjunction with the Department of Housing and Urban Development, proposed the construction of an apartment building for the elderly in Penn Hills, Pennsylvania. The project is authorized by the United States Housing Act of 1937, 42 U.S.C. Sec. 1437 et seq. (1982).

A number of developers, including plaintiff, submitted bids in response to the County Housing Authority's July 2, 1982 request for proposals. The Authority initially accepted the plaintiff's proposal but, on review, HUD rejected the bid as nonresponsive. On February 14, 1983, the Authority approved the proposal submitted by another bidder, Crossgates, Inc., and HUD concurred with that selection on March 4, 1983.

On March 3, 1983, plaintiff was notified that HUD had found its bid nonresponsive because of "insufficient storage space." The plaintiff's request for withdrawal of HUD's objection was denied by the agency on April 11, 1983.

Plaintiff filed its complaint in the district court on June 9, 1983. A contract between Crossgates and the Authority was not executed until December 21, 1983, although the contractor had done some preliminary work before that date.

At a hearing on the request for a preliminary injunction, defendants argued that, because suit was commenced before execution of a contract, exclusive jurisdiction was in the United States Claims Court. Plaintiff wavered in its approach to whether the dispute was a pre or post-award case. In its complaint and opening remarks at the hearing, plaintiff argued this was a pre-award case, but that position began to shift as testimony was taken.

In reviewing the record, the court concluded that "the selection of another developer does constructively constitute an award of the contract even without a formally executed document." Because the plaintiff's action was filed after the selection of another bidder's proposal, the district judge characterized this as a post-award case and therefore held the court had jurisdiction. Hence, it was not necessary to reach the defendants' contention that the Claims Court has exclusive jurisdiction in pre-award cases.

On the merits, the court first reviewed the stringent standards applicable when a disappointed bidder attempts to set aside the award of a government contract. However, the district judge chose to deny the injunction on another ground. The plaintiff's alleged loss was compensable in damages and, therefore, the irreparable injury necessary for a preliminary injunction had not been demonstrated.

On appeal, plaintiff contends that it has suffered irreparable harm because it cannot recover its anticipated profits under the contract. Plaintiff also reasserts its position that HUD's actions were illegal and irrational. Defendants renew their challenge to the jurisdiction of the district court, contending that this is a pre-award case for which exclusive jurisdiction rests in the Claims Court. They argue alternatively that if this is post-award litigation, Crossgates should have been joined as an indispensable party.

We first address the jurisdictional issue. Defendants do not contest the proposition that the district courts have jurisdiction in post-award government contract cases. See B.K. Instrument, Inc. v. United States, 715 F.2d 713 (2d Cir.1983); United States v. John C. Grimberg Co., Inc., 702 F.2d 1362 (Fed.Cir.1983). Defendants, however, dispute the district court's finding that because Crossgates had been "selected," it had been "awarded" the contract. They note that, even after a particular bidder's proposal has been chosen, further negotiations between the government agency and the contractor are required and may result in a failure to reach an agreement. Defendants say the possibility that a contract will not be executed is realistic enough that the other bidders are asked if they wish further consideration should the selected proposal not result in a contract.

The parties have not cited any case law or legislative history on the meaning of "award" in this context, and our research has not been particularly enlightening. However, we do note that in AABCO, Inc. v. United States, 3 Cl.Ct. 109, 113 (1983), the Claims Court found that negotiations after initial acceptance of a bid postponed the date of the "final award."

The Code of Federal Regulations on public contracts states that "award shall be made by the contracting officer by written notice", 41 C.F.R. Sec. 1-2.407-1(a) (1983), and that "award shall be made by mailing or otherwise furnishing to the successful bidder a properly executed award document or notice of award." Id. Sec. 1-2.407-1(c). In this case, the regulations may not be pertinent because the contract was to be executed by the local housing authority rather than the federal government.

In any event, the record does not contain a document stating that a contract had been "awarded" to Crossgates. In a letter dated March 4, 1983, HUD notified the Authority that it should advise "Crossgates of their selection in accordance with HUD handbook 7417.1, et cetera." However, whether such notice was ever sent, what it contained, and its effect if received are not revealed in the record. Absent these pertinent facts, we cannot determine whether this is a pre or post-award case. Despite this gap in the record, we conclude that the district court properly considered the merits because it had jurisdiction even if this is a pre-award case. ¹

We begin with the statute that has generated differing views on the jurisdiction of the United States Claims Court. The Federal Court Improvements Act of 1982 created the Article I Claims Court and essentially transferred to it the trial jurisdiction of the former Court of Claims. See 28 U.S.C. Sec. 1491(a)(1) (1982); see also S.Rep. 275, 97th Cong., 1st Sess. 7-8, reprinted in 1982 U.S.Code Cong. & Ad.News 11, 17-18. Relief in the Court of Claims generally had been limited to an award of monetary damages, see United States v. Testan, 424 U.S. 392, 397-98, 96 S.Ct. 948, 952-53, 47 L.Ed.2d 114 (1976), but the Act enlarged the new court's jurisdiction beyond that of its predecessor. "To afford complete relief on any contract claim brought before the contract is awarded, the court shall have exclusive jurisdiction to grant declaratory judgments and such equitable and extraordinary relief as it deems proper, including but not limited to injunctive relief." 28 U.S.C. Sec. 1491(a)(3) (1982).

Relying solely on the literal language of section 1491(a)(3), the District Court for the District of Columbia held that it had been ousted of jurisdiction and that only the Claims Court could grant a pre-award injunction. Opal Manufacturing Co. v. UMC Industries, Inc., 553 F.Supp. 131 (D.D.C.1982). See also B.K. Instruments, 715 F.2d at 721 n. 4 (dictum). The word "exclusive" was interpreted as applying to any and all other courts. That construction, although plausible, is one that we believe to be erroneous.

The legislative history explaining the grant of equitable power to the Claims Court was reviewed in United States v. John C. Grimberg Co., 702 F.2d 1362, 1369-72 (Fed.Cir.1983). In an early version of the proposed legislation, the Claims Court was to be given equitable power in all cases brought before it. See S.21, 97th Cong., 1st Sess. Sec. 132(a)(2) (1981); H.R. 2405, 97th Cong., 1st Sess. Sec. 126(d) (1981). However, because of strenuous objections by the Justice Department, that provision was changed to limit the grant to pre-award contract cases. The Federal Circuit Court, although not presented with the issue of pre-award jurisdiction, commented that it could find no indication that Congress intended to take away the district court's power to act in those cases. 702 F.2d at 1374.

The legislative history strongly supports the Federal Circuit Court's conclusion. The Report of the House Judiciary Committee observes that the Claims Court was to be given equitable power, but continues: "This enlarged authority is exclusive of the Board of Contract Appeals and not to the exclusion of the district court." H.R.Rep. No. 312, 97th Cong., 1st Sess. 43 (1981).

The Committee's statement is straightforward enough. It should also be observed that under the Contract Disputes Act of 1978, Pub.L. 95-563, 92 Stat. 2383 (codified as amended at 41 U.S.C. Secs. 601-613 (1982)), the Court of Claims and agency boards of contract...