Forman v. U.S.

• Decision Date: 16 May 2003
• Docket Number: No. 02-5117.,02-5117.
• Citation: 329 F.3d 837
• Parties: Wallace FORMAN, Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

329 F.3d 837

Wallace FORMAN, Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee.

No. 02-5117.

United States Court of Appeals, Federal Circuit.

May 16, 2003.

Marc Lamer, Kostos & Lamer, P.C., of Philadelphia, PA, argued for plaintiff-appellant.

Martin F. Hockey, Jr., Senior Trial Attorney, Commercial Litigation Branch, Civil Division, Department of Justice, of Washington, DC, argued for defendant-appellee. With him on the brief was David M. Cohen, Director.

Before BRYSON, GAJARSA, and PROST, Circuit Judges.

Opinion for the Court filed by Circuit Judge GAJARSA. Opinion concurring in part and dissenting in part filed by Circuit Judge BRYSON.

GAJARSA, Circuit Judge.

Wallace Forman ("Forman") brought suit in the United States Court of Federal Claims for reimbursement of expenses allegedly incurred pursuant to an agreement with the Federal Bureau of Investigation ("FBI"). These expenses include: (1) travel expenses and related costs; (2) product manufacturing and marketing costs; (3) advertising and seminar expenses; (4) business loans; (5) a product license payment; and (6) an employee's salary. The Court of Federal Claims granted the government's motion for summary judgment, holding that Forman failed to follow the procedures required by the contract for reimbursement of expenses. Forman v. United States, No. 99-489C (Fed.Cl. Mar. 13, 2002). We conclude that there exist genuine issues of material fact with respect to Forman's hiring and employment of a company salesman, and whether or not this hiring was at the direction of the FBI. We therefore hold that the Court of Federal Claims improperly granted the government's motion for summary judgment with regard to whether Forman is entitled to reimbursement of the employee's salary and other expenses, and accordingly affirm-in-part, reverse-in-part, and remand for further proceedings consistent with this opinion.

I. BACKGROUND

In September 1988, Forman signed a pre-indictment plea agreement with the FBI resulting from charges against him arising from an FBI investigation, entitled "Operation Thimble." This investigation targeted clothing industry corruption involving defense contracts awarded by the Defense Personnel Support Center. Operation Thimble investigated allegations of corruption of many parties involved in government contracting, including those that offered bribes (e.g., private business consultants), and those that accepted them (e.g., federal procurement officials). One of the private consultants targeted was Jules Wertheimer ("Wertheimer"), a long-time consultant in the industry. Evidence obtained by the FBI against Wertheimer, however, was insufficient for any criminal charges. In order to develop a stronger case against Wertheimer, the FBI enlisted Forman's aid. Forman, in an effort to reduce his own sentence resulting from Operation Thimble, signed a formal agreement (the "Agreement") to cooperate actively with the FBI in the investigation targeting Wertheimer, entitled "Operation Extra Gold."

The Agreement, the interpretation of which is ultimately the subject of this appeal, was relatively short (less than five pages) and signed by Forman and an authorized agent of the FBI. The most critical paragraphs are reproduced below:

5) The FBI shall reimburse FORMAN for expenses incurred by him which are deemed by the FBI to be reasonable and in furtherance of this investigation. FORMAN agrees that prior to incurring such expenses, he will consult with the FBI's designated representative as to the nature and justification for incurring expenses. The FBI has the right to direct FORMAN not to incur expenses which the FBI deems not to be in furtherance of its investigative goals.

7) FORMAN shall not obligate or attempt to obligate the FBI, or any employee thereof, in any financial or contractual agreement, written or oral, without the prior express authorization of the FBI.

* * *

10) FORMAN agrees, when directed by the FBI, to testify and furnish all information in his possession, custody or control, which he has received during the course of, or related to, this investigation.

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13) The FBI is responsible for the financing of all aspects of this investigation, which in its discretion will further its investigative goals.

* * *

18) FORMAN will not economically benefit personally when entering into contractual agreements with the Government when the following occurs: The FBI has requested FORMAN to formally solicit the Government business and the subsequent contract has been tainted by deceit, bribery or fraud caused by the undercover investigation. ... FORMAN will also, on a quarterly basis, place his profits of each tainted contract in a separate trust account for return to the Government at the conclusion of the investigation.

* * *

20) It is further expressly understood that the FBI assumes no responsibility or liability for any business or income losses which may result to FORMAN and INDUSTRION as a result of his entry into this agreement.

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25) This Agreement shall commence on the date of acceptance by FORMAN as signified by his signature, and shall continue as long as the FBI deemed that FORMAN's services are required. It may be terminated at any time by either party by deliverance of a written notice of termination.

(Emphases added).

Forman's role in Operation Extra Gold was to establish and operate a textile company known as "Pyro-Shield." To the outside observer, Pyro-Shield was a legitimate, for-profit enterprise that manufactured and marketed a patented fireproof fabric referred to as "Sandel." Forman licensed rights from the patent owner, Daniel Ferziger ("Ferziger"), to make and sell Sandel. Forman promoted Pyro-Shield through advertising, seminars, video sales presentations, literature, and sales trips. He hired and employed a salesman, one Martin Reiser ("Reiser"), to help develop the company business. He also contacted former procurement officials at various government agencies in attempts to market Sandel. Pyro-Shield also attracted the attention of an outside investor, Northeast Investors Corporation ("Northeast"). Northeast, however, was an entirely fictitious front company, composed solely of undercover agents ("UCAs") of the FBI. Forman, through Pyro-Shield, provided an entry point for the UCAs into the clothing industry and the potential identification of corrupt practices and its perpetrators.

Forman made the first introductions of the UCAs to the ultimate target of Operation Extra Gold, Wertheimer. His cooperation, however, extended beyond simple introductions. Forman often wore concealed wires and made recordings of conversations. He also testified at grand jury and trial proceedings for the FBI. In fact, during Forman's sentencing after the conclusion of Operation Extra Gold, the district court judge characterized Forman's cooperation as "exceptional." Ultimately, Operation Extra Gold led to the arrest and conviction of Wertheimer and others. Forman testified, in accordance with Paragraph 10 of the Agreement, at Wertheimer's trial in September, 1993.

After testifying at Wertheimer's trial, Forman requested reimbursement from the FBI for certain expenses incurred during the course of the undercover operation, including: (1) general travel expenses and related costs, $20,972.68; (2) Sandel production and marketing costs, $40,518.10; (3) advertising and seminar expenses, $23,530.98; (4) loans to the Sandel patentee, Ferziger, $126,798.40; (5) an exclusive license for Sandel, $50,000; and (6) salary and expenses related to Forman's hiring of Reiser, $40,341.50.

Forman's request for reimbursement of all these expenses was denied by the FBI on June 19, 1995. The FBI's Chief Contracting Officer later denied Forman's appeal (with the exception of $5,000 in travel expenses) on April 14, 1999, because Forman failed to obtain authorization from the FBI before incurring the expenses, in violation of the contract. In July 1999, Forman filed a complaint with the Court of Federal Claims. The court denied the government's motion to dismiss for lack of jurisdiction. Contrary to the government's assertions that the six-year statute of limitations began to run when the expenses were incurred, the court noted that the FBI denied Forman's claim for reimbursement in June 1995, and by filing suit by July 1999, he was well within the statute of limitations under the Tucker Act, 28 U.S.C. § 2501. Nevertheless, the Court of Federal Claims granted summary judgment for the government, stating that the Agreement required explicit prior approval of expenses by the FBI, which Forman never obtained. Forman filed a timely appeal with this court, and we have jurisdiction pursuant to 28 U.S.C. § 1295(a)(3).

II. DISCUSSION

Whether we have jurisdiction to adjudicate a particular issue on appeal is a question of law. Palmer v. Barram, 184 F.3d 1373, 1377 (Fed.Cir.1999). Interpretation of a government contract is a question of law, subject to de novo review on appeal. C. Sanchez & Son v. United States, 6 F.3d 1539, 1544 (Fed.Cir.1993). The grant of summary judgment on a question of law is subject to de novo review. Seaboard Lumber Co. v. United States, 308 F.3d 1283, 1292 (Fed.Cir.2002). Summary judgment is appropriate where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Anderson v. Liberty Lobby, 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

A.

On appeal, the government first argues that the Court of Federal Claims erred by hearing Forman's appeal. The government asserts that the court lacked jurisdiction for two reasons. First, it argues that Operation Extra Gold's "last investigative activity" was concluded in January 1991, over eight years prior to the case being brought to the Court of Federal Claims, well outside the six-year statute of limitations under the Tucker Act. See 28 U.S.C. § 2501 (2000). Second, the government argues...