Dept. of Army v. Blue Fox

• Decision Date: 20 January 1999
• Docket Number: 971642
• Citation: 142 L.Ed.2d 718,525 U.S. 255,119 S.Ct. 687
• Parties: 121 F.3d 1357, reversed and remanded. SUPREME COURT OF THE UNITED STATES 119 S.Ct. 687 142 L.Ed.2d 7181642 DEPARTMENT OF THE ARMY, PETITIONER v. BLUE FOX, INC. ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT [
• Court: U.S. Supreme Court

525 U.S. 255

119 S.Ct. 687

142 L.Ed.2d 718

121 F.3d 1357, reversed and remanded

SUPREME COURT OF THE UNITED STATES

No. 97 1642

DEPARTMENT OF THE ARMY, PETITIONER v. BLUE FOX, INC.

ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

January 20, 1999

Chief Justice Rehnquist delivered the opinion of the Court.

An insolvent prime contractor failed to pay a subcontractor for work the latter completed on a construction project for the Department of the Army. The Department of the Army having required no Miller Act bond from the prime contractor, the subcontractor sought to collect directly from the Army by asserting an equitable lien on certain funds held by the Army. The Court of Appeals for the Ninth Circuit held that §10(a) of the Administrative Procedure Act (APA), 5 U.S.C. § 702 waived the Government's immunity for the subcontractor's claim. We hold that §702 did not nullify the long settled rule that sovereign immunity bars creditors from enforcing liens on Government property.

Participating in a business development program for socially and economically disadvantaged firms run by the Small Business Administration (SBA), the Department of the Army contracted with Verdan Technology, Inc., in September 1993, to install a telephone switching system at an Army depot in Umatilla, Oregon. Verdan, in turn, employed respondent Blue Fox, Inc., as a subcontractor on the project to construct a concrete block building to house the telephone system and to install certain safety and support systems.

Under the Miller Act, 40 U.S.C. § 270a 270d, a contractor that performs "construction, alteration, or repair of any public building or public work of the United States" generally must post two types of bonds. §270a(a). First, the contractor must post a "performance bond for the protection of the United States" against defaults by the contractor. §270a(a)(1). Second, the contractor must post a "payment bond for the protection of all persons supplying labor and material." §270a(a)(2). The Miller Act gives the subcontractors and other suppliers "the right to sue on such payment bond for the amount, or the balance thereof, unpaid at the time of institution of such suit and to prosecute said action to final execution and judgment for the sum or sums justly due him." §270b. Although the Army's original solicitation in this case required the contractor to furnish payment and performance bonds if the contract price exceeded $25,000, the Army later amended the solicitation, treated the contract as a "services contract," and deleted the bond requirements. Verdan therefore did not post any Miller Act bonds.

Blue Fox performed its obligations, but Verdan failed to pay it the $46,586.14 that remained due on the subcontract. After receiving notices from Blue Fox that it had not been fully paid, the Army nonetheless disbursed a total of $86,132.33 to Verdan as payment for all work that Verdan had completed. In January 1995, the Army terminated its contract with Verdan for various defaults and another contractor completed the Umatilla project. Blue Fox obtained a default judgment in tribal court against Verdan. Seeing that it could not collect from Verdan or its officers, it sued the Army for the balance due on its contract with Verdan in Federal District Court.1

Predicating jurisdiction on 28 U.S.C. § 1331 and the APA, Blue Fox sought an "equitable lien" on any funds from the Verdan contract not paid to Verdan, or any funds available or appropriated for completion of the Umatilla project, and an order directing payment of those funds to it. Blue Fox also sought an injunction preventing the Army from paying any more money on the Verdan contract or on the follow-on contract until Blue Fox was paid. By the time of the suit, however, the Army had paid all amounts due on the Verdan contract, Blue Fox failed to obtain any preliminary relief, and the Army subsequently paid the replacement contractor the funds remaining on the Verdan contract plus additional funds.2

On cross-motions for summary judgment, the District Court held that the waiver of sovereign immunity provided by the APA did not apply to respondent's claim against the Army. The District Court thus concluded that it did not have jurisdiction over respondent's claim and accordingly granted the Army's motion for summary judgment. In a split decision, the Court of Appeals for the Ninth Circuit reversed in relevant part. See Blue Fox Inc. v. Small Business Admin., 121 F.3d 1357 (1997). The majority held that under this Court's decision in Bowen v. Massachusetts, 487 U.S. 879 (1988), the APA waives immunity for equitable actions. Based in part on its analysis of several of our cases examining a surety's right of subrogation, the majority held that the APA had waived the Army's immunity from Blue Fox's suit to recover the amount withheld by the Army. The majority concluded that the lien attached to funds retained by the Army but owed to Verdan at the time the Army received Blue Fox's notice that Verdan had failed to pay. The majority stated that "the Army cannot escape Blue Fox's equitable lien by wrongly paying out funds to the prime contractor when it had notice of Blue Fox's unpaid claims." 121 F.3d, at 1363.

The dissenting judge stated that "no matter how you slice Blue Fox's claim, it seeks funds from the treasury to compensate for the Army's failure to require Verdan to post a bond." Id., at 1364 (opinion of Rymer, J.). In her view, Congress chose to protect subcontractors like Blue Fox through the bond requirements of the Miller Act, not by waiving immunity in the APA to permit subcontractors to sue the United States directly for amounts owed to them by the prime contractor. Because this rule has been "conventional wisdom for at least fifty years," she did not agree that Congress had waived the Army's sovereign immunity from Blue Fox's suit. Ibid. The Government petitioned for review, and we granted certiorari to decide whether the APA has waived the Government's immunity from suits to enforce an equitable lien. 523 U.S. __ (1998).

"Absent a waiver, sovereign immunity shields the Federal Government and its agencies from suit." FDIC v. Meyer, 510 U.S. 471, 475 (1994). Congress, of course, has waived its immunity for a wide range of suits, including those that seek traditional money damages. Examples are the Federal Tort Claims Act, 28 U.S.C. § 2671 et seq., and the Tucker Act, 28 U.S.C. § 1491.3 They are not involved here. Respondent sued the Army under §702 of the APA, which provides in relevant part:

"A person suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action within the meaning of a relevant statute, is entitled to judicial review thereof. An action in a court of the United States seeking relief other than money damages and stating a claim that an agency or an officer or employee thereof acted or failed to act in an official capacity or under color of legal authority shall not be dismissed nor relief therein be denied on the ground that it is against the United States or that the United States is an indispensable party." 5 U.S.C. § 702 (emphasis added).

Respondent asks us to hold, as did the court below, that this provision, which waives the Government's immunity from actions seeking relief "other than money damages," allows subcontractors to place liens on funds held by the United States Government for work completed on a prime contract. We have frequently held, however, that a waiver of sovereign immunity is to be strictly construed, in terms of its scope, in favor of the sovereign. See, e.g., Lane v. Pena, 518 U.S. 187, 192 (1996) (citing cases); Library of Congress v. Shaw, 478 U.S. 310, 318 (1986). Such a waiver must also be "unequivocally expressed" in the statutory text. See Lane, supra, at 192. Respondent's claim must therefore meet this high standard.

Respondent argues, and the court below held, that our analysis of §702 in Bowen compels the allowance of respondent's lien. We disagree. In Bowen, we examined the text and legislative history of §702 to determine whether the Commonwealth of Massachusetts could sue the Secretary of Health and Human Services to enforce a provision of the Medicaid Act that required the payment of certain amounts to the State for Medicaid services. We held that the State's complaint in Bowen was not barred by the APA's prohibition on suits for money damages. The Court of Appeals below read our decision in Bowen as interpreting §702's reference to "other than money damages" as waiving immunity from all actions that are equitable in nature. See 121 F.3d, at 1361 ("Since the APA waives immunity for equitable actions, the district court had jurisdiction under the APA").

Bowen's analysis of §702, however, did not turn on distinctions between "equitable" actions and other actions, nor could such a distinction have driven the Court's analysis in light of §702's language. As Bowen recognized, the crucial question under §702 is not whether a particular claim for relief is "equitable" (a term found nowhere in §702), but rather what Congress meant by "other than money damages" (the precise terms of §702). Bowen held that Congress employed this language to distinguish between specific relief and compensatory, or substitute, relief. The Court stated:

" 'We begin with the ordinary meaning of the words Congress employed. The term "money damages," 5 U.S.C. § 702 we think, normally refers to a sum of money used as compensatory relief. Damages are given to the plaintiff to substitute for a suffered loss, whereas specific remedies "are not substitute remedies at all, but attempt to give the plaintiff the very thing to which he was entitled.'' ' '' 487 U.S., at 895 (quoting Maryland Dept. of Human Resources v. Department of Health and Human Services, 763 F.2d 1441, 1446 (CADC 1985) (citation omitted)).

Bowen also concluded from its analysis of relevant...