In re Federal-Aid Highway Program, B-189272
| Decision Date | 27 June 1978 |
| Docket Number | B-189272 |
| Citation | 57 Comp.Gen. 577 |
| Parties | IN THE MATTER OF FEDERAL-AID HIGHWAY PROGRAM-- FEDERAL REIMBURSEMENT FROM STATE ANTITRUST SETTLEMENT PROCEEDS. |
| Court | Comptroller General of the United States |
Highways - construction - federal-aid highway program - antitrust violation recoveries state brought antitrust treble damages action against suppliers of asphalt used in highway construction under federal-aid highway program. Although united states had declined to share costs of litigation federal government is entitled to share in resultant settlement attributable to actual damages. 15 U.S.C. 15a does not allow the federal government to claim share of treble damages. Highways - construction - federal-aid highway program - antitrust violation recoveries amount of federal share in antitrust settlement May be applied to other allowable costs from the periods covered by settlement if the full percentage of federal share was not used during these periods.
The director of transportation, state of California, requests us to rule on the validity of a demand by the federal highway administration (FHWA), united states department of transportation, for a share in a $5, 732, 433.24 antitrust action settlement received by the California department of transportation (caltrans) from suppliers of asphalt used in highway construction under a federal-aid highway program. (see western liquid asphalt cases, 309 F.Supp. 157 (n.D. Cal 1970) and 303 F.Supp. 1053 (n.D. Cal. 1969)).
According to the California director of transportation:
Fhwa has indicated that it will demand to participate in the settlement proceeds by reason of prior opinions of your office, particularly comptroller general decisions b-162539 dated October 11, 1967, and b-162652, dated November 27, 1967 (47 Comp.Gen. 309), which the state of California contends are not applicable and should be reanalyzed in view of the particular facts involved. A review of the scope of those earlier decisions May assist in arriving at a mutually acceptable resolution of this matter.
Basically the position of the state of California is that the federal government, when requested by the state, refused to assist in prosecuting the action, or to share in the costs or risks involved in the prosecution of the case by the state. Under such circumstances, any claim the federal government May have had in any recovery has been waived. This and other matters not considered in the two earlier decisions indicate that no reimbursement is owing to the federal highway administration.
According to a legal memorandum accompanying the director's request, there are four reasons for concluding that the FHWA is not entitled to a share in the western liquid asphalt antitrust settlement, despite our cited decisions. These reasons are:
First any "partnership arrangement" between the federal government and the state insofar as the recovery of damages for violations of the antitrust laws was breached by the federal government in refusing to assist in the prosecution of the action or to share in the risk involved in the prosecution in the action by the state.
Second, the overpayments recovered by the state consisted entirely of state funds, since the federal government retained no interest in the grants to the state following receipt by the state of such funds.
Third, the federal government is not entitled to recover treble damages.
Fourth, the state was the party which suffered the real injury from the violation of the antitrust laws and the overpayments, not the federal government.
We will discuss each of these arguments in succession:
1. FHWA has breached its "partnership" arrangement with the state
In our cited decisions concerning the recovery of a federal share in antitrust damages in connection with state highway construction programs, we have referred to the federal-state relationship stemming from the federal-aid highway program as authorized by 23 U.S.C. 101 et seq. (1970 and Supp. V, 1975), as a "partnership arrangement." For example, in our decision 47 Comp.Gen. 309, we said in part (at page 311):
We do not believe that the partnership arrangement under which the federal-aid highway program is prosecuted May properly be said, in the absence of specific governing provisions, to reach beyond the project costs shared by the federal and state governments.
Previously, in decision b-162539, October 11, 1967, we said:
Full recognition of the partnership arrangement between the state and the federal government with respect to the recovery effected dictates that the out-of-pocket expenses incurred also be shared proportionally.
The argument of the state assumes that the "partnership arrangement" spoken of in our two decisions is in the nature of a partnership agreement in law, subject to dissolution because of failure of the partners to agree to contribute to costs of litigating partnership rights. Whether or not this is sound partnership law, the term "partnership arrangement" in our decisions was used in a metaphorical sense, as the context indicates, rather than in the sense of a specific legal relationship.
Used in this sense, the phrase "partnership arrangement" merely describes general rights, stemming from the relationship between federal and state governments in the federal-aid highway program whereby, pursuant to chapter 1 of title 23, U.S.C. The united states and the respective states enter into agreements to share the cost of construction of highways on the federal-aid highway system. Accordingly, the extent to which FHWA is entitled to share in the settlement depends upon the authority under which it awarded funds to the state and any conditions, express or implied, that attached to the award when the state accepted it.
In our view, nothing in the relationship between the state and federal governments under the federal-aid highway program compels the conclusion that refusal of the federal government to participate in the cost of an antitrust action deprives it of the right to receive a share of the settlement to which it is otherwise entitled. As was said in b-162539, supra, to hold otherwise would be to allow the state to profit to the extent of the federal interest. It would be recovering twice for the overcharge-- once by way of reimbursement from the federal government and again from the defendants in the settlement.
2. Overpayments recovered by state are state funds
The state submission cites decisions to the effect that, when funds are provided to a state under a federal grant-in-aid program, they lose their federal character and become state funds. The state argues that:
If federal funds become state funds when receipted for by the state, it would be anomalous to suggest that the federal government retains an interest in such funds sufficient to demand repayment in the event the project costs for which the funds were used have been indirectly affected after completion of the project.
Contrary to the state's argument, we do not find our decisions inconsistent with the proposition that the funds apportioned under the federal-aid highway program become state funds when received by the state. The amount of money given the state in this case for highway construction is conditional upon payment of a non-federal or state share. 23 U.S.C. 120 (1970). The ratio of costs established by statute (id.) Places a maximum on federal participation in the program. (there is no limit on the proportion of state participation as the cases cited by the state note.) The money given to the state under a grant must be spent only...
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