Gould, Inc. v. U.S.

• Decision Date: 11 October 1995
• Docket Number: No. 94-5040,94-5040
• Citation: 67 F.3d 925
• Parties: 40 Cont.Cas.Fed. (CCH) P 76,845 GOULD, INC., Plaintiff-Appellant, v. The UNITED STATES, Defendant-Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

Page 925

67 F.3d 925

40 Cont.Cas.Fed. (CCH) P 76,845

GOULD, INC., Plaintiff-Appellant, v. The UNITED STATES, Defendant-Appellee.

No. 94-5040.

United States Court of Appeals Federal Circuit.

Oct. 11, 1995.

Michael T. Janik, McKenna & Cuneo, Washington, DC, argued for plaintiff-appellant. With him on the brief was Jamie Kent Hamelburg.

Arnold M. Auerhan, Commercial Litigation Branch, Department of Justice, Washington, DC, argued for defendant-appellee. With him on the brief were Frank W. Hunger, Assistant Attorney General, David M. Cohen, Director and Jeanne E. Davidson, Assistant Director. Also on the brief was Andrei Kushner, Associate Counsel, Office of the General Counsel, Department of Navy, Washington, DC, of counsel.

Before ARCHER, Chief Judge, NEWMAN and PLAGER, Circuit Judges.

PLAGER, Circuit Judge.

This long-running contract dispute is before the court again. In this appeal, Gould, Inc. (Gould) appeals the judgment of the United States Court of Federal Claims, Gould, Inc. v. United States, 29 Fed.Cl. 758 (1993), dismissing again its complaint against the United States, this time for lack of jurisdiction. We again vacate and remand.

BACKGROUND

In 1983, the Naval Electronics Systems Command (Navy) solicited bids for a fixed-price, five-year contract to produce "Bancroft"-type radios. ¹ In its request for proposals (RFP), the Navy included detailed performance specifications for the radios. In addition, the RFP included drawings, labelled "for informational purposes only," of prior Bancroft radios that had been developed for the Army.

On October 3, 1983, the Navy awarded Gould the Contract, No. N00039-83-C-0407 (the '0407 Contract), for a fixed price of $44,778,779. Gould contends that its bid, in part, reflected a belief that it could simply modify the Army Bancroft radio to satisfy the Navy's enhanced performance requirements. However, when Gould's attempts to modify failed, it expended additional time, in excess of that contemplated when bidding on the contract, completely redesigning the radio. During contract performance, the Navy provided Gould with data which confirmed Gould's findings that simply upgrading the Army's radio would not meet the performance requirements of the Navy contract. According to Gould, it had requested this information from the Navy during the pre-award conference.

On December 11, 1986, Gould submitted a certified claim to the contracting officer seeking an "equitable reformation and upward adjustment in the price of [the] contract." Gould sought more than $57 million in added costs due to the unanticipated design work that Gould had performed under the contract. In support of its requested relief the claim contained three separate counts. In Count one, Gould alleged that the Navy had violated 10 U.S.C. Sec. 2306(h)(1)(D) (1982) by failing to supply a "stable design" for the multi-year contract, ² thereby making the contract illegal. Count two alleged that the Navy improperly withheld information that would have apprised bidders of "the degree of design effort and risk involved in meeting the Navy's performance specification." Count three alleged that there was a mutual mistake by both Gould and the Navy regarding a basic assumption of the contract, namely that there was only minimal design and development work to be performed under the contract. ³

On January 6, 1988, the contracting officer issued a decision denying Gould's claim. Gould appealed that decision to the then Claims Court pursuant to 41 U.S.C. Sec. 609(a)(1) (1988). In addition to raising jurisdictional issues, the government moved to dismiss for failure to state a claim upon which relief can be granted.

In a decision dated January 16, 1990, the Claims Court granted the government's motion. Gould, Inc. v. United States, 19 Cl.Ct. 257 (1990) (Gould I ). The court took On June 7, 1991, we vacated the decision of the Claims Court and remanded the case for trial. Gould, Inc. v. United States, 935 F.2d 1271 (Fed.Cir.1991) (Gould II ). We held that (i) Gould had not limited its claim to one for contract reformation, and (ii) Gould's complaint contained sufficient facts to state a claim upon which relief could be granted.

Gould's claim as one for contract reformation. Although this was an equitable remedy, the court concluded that it had jurisdiction to hear the suit because if Gould prevailed on the merits it would be entitled to a money judgment. The court then focused on whether Gould was entitled to contract reformation under any of the three counts in Gould's complaint. The court concluded that the answer was no, that Gould had not alleged facts sufficient to support its claim for contract reformation based on any of the three counts. The Claims Court dismissed the complaint under Rule 12(b)(4) of the Rules of the United States Claims Court for failure to state a claim upon which relief can be granted.

Upon remand, the government filed a motion to dismiss for lack of jurisdiction. In an opinion dated October 29, 1993, the Court of Federal Claims ⁴ granted the government's motion. Gould, Inc. v. United States, 29 Fed.Cl. 758 (1993) (Gould III ). The court found:

Because Gould's complaint is based solely on a contract with the United States and yet it alleges both that there was no stable design and that the contract (whether express or implied in fact) was illegal, the only possible basis for contract jurisdiction is a contract implied in law. The Tucker Act's grant of jurisdiction is limited, however, to cases based "upon any express or implied contract with the United States," 28 U.S.C. Sec. 1491(a)(1) (1988). Implied-in-law contracts, if contracts at all, are not contracts within this court's jurisdiction. Merritt v. United States, 267 U.S. 338, 341, 45 S.Ct. 278, 279, 69 L.Ed. 643 (1925); City of El Centro v. United States, 922 F.2d 816, 823 (Fed.Cir.1990).

Id. at 761 (footnotes omitted). Furthermore, the court held that payment on Gould's claim was barred by the Supreme Court's decision in Office of Personnel Management v. Richmond, 496 U.S. 414, 110 S.Ct. 2465, 110 L.Ed.2d 387 (1990), and that our decision in Gould II was not binding on the Court of Federal Claims as the law of the case. Although acknowledging that the law of the case doctrine typically requires a lower court, on remand, to follow the decision of the reviewing court, the Court of Federal Claims concluded that the law of the case doctrine did not apply for two reasons: first, subsequent controlling authority, namely Richmond, conflicts with our decision in Gould II; and second, the issues before the trial court were not addressed by the Court of Appeals in Gould II. Therefore, the Court of Federal Claims granted the government's motion, dismissing Gould's complaint. This appeal followed.

DISCUSSION

I.

Whether a motion to dismiss for lack of jurisdiction has been properly granted is a question of law subject to complete and independent review on appeal. Shearin v. United States, 992 F.2d 1195 (Fed.Cir.1993). Gould's amended complaint maintains that jurisdiction of this action lies in the Court of Federal Claims pursuant to the Tucker Act, 28 U.S.C. Sec. 1491. The Tucker Act "is itself only a jurisdictional statute; it does not create any substantive right enforceable against the United States for money damages." United States v. Testan, 424 U.S. 392, 398, 96 S.Ct. 948, 953, 47 L.Ed.2d 114 (1976). An action may be maintained under the Tucker Act only if it is "founded either upon the Constitution, or any Act of Congress, or any regulation of an executive department, or upon any express or implied contract with the United States, or for liquidated or unliquidated damages in cases not sounding in tort." 28 U.S.C. Sec. 1491(a)(1) (1992). Gould relies solely on its contract with the government, the '0407 Contract, as a basis for jurisdiction in the Court of Federal Claims.

The government argues that the contracting officer lacked actual authority to enter into an express or implied-in-fact contract with Gould, and therefore Gould's only theory of recovery is under an implied-at-law claim which is outside the jurisdiction of the Court of Federal Claims. In its amended complaint Gould alleged that its procurement contract with the government was entered into in violation of law since the government did not provide a "stable design" as required in 10 U.S.C. Sec. 2306(h)(1)(D). Given Gould's allegation, argues the government, no contract (express or implied-in-fact) could have arisen because a contracting officer does not have actual authority to enter into illegal contracts. Therefore, the government argues, the Court of Federal Claims correctly found that the only possible basis for contract jurisdiction is a contract implied-at-law. Since it is well established that such claims are outside the jurisdiction of the Court of Federal Claims, the government concludes that the trial court properly dismissed Gould's amended complaint for lack of jurisdiction.

As an initial matter, the government mischaracterizes the issue in this case. In Spruill v. Merit Sys. Protection Bd., 978 F.2d 679 (Fed.Cir.1992), we discussed the differences between a dismissal for lack of jurisdiction and a dismissal for failure to state a claim upon which relief can be granted. Jurisdiction in this context refers to the power of a court to hear and decide a case--subject matter jurisdiction. Id. at 686. A dismissal for lack of jurisdiction means that the subject-matter of the dispute is one that the court is not empowered to hear and decide.

A dismissal for failure to state a claim, however, is a decision on the merits which focuses on whether the complaint contains allegations, that, if proven, are sufficient to entitle a party to relief. See Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-102, 2 L.Ed.2d 80 (1957) (A motion to dismiss for failure to state a claim should only be granted when "it appears beyond doubt that the plaintiff can prove...