Jones Motor Co., Inc. v. Teledyne, Inc.

• Decision Date: 25 July 1988
• Docket Number: Civ. A. No. 86-358 LON.
• Parties: JONES MOTOR CO., INC., Plaintiff, v. TELEDYNE, INC. and the United States of America, Defendants.
• Court: U.S. District Court — District of Delaware

690 F. Supp. 310

JONES MOTOR CO., INC., Plaintiff, v. TELEDYNE, INC. and the United States of America, Defendants.

Civ. A. No. 86-358 LON.

United States District Court, D. Delaware.

July 25, 1988.

Clark W. Furlow of Lassen, Smith, Katzenstein & Furlow, Wilmington, Del., and Philip W. Vogler (argued) of Montgomery, McCracken, Walker & Rhoads, Philadelphia, Pa., for plaintiff.

R. Franklin Balotti, and William W. Bowser, of Richards, Layton & Finger, Wilmington, Del., and James P. Gallatin, Jr. (argued) of McCamish, Ingram, Martin & Brown, Washington, D.C., for defendant Teledyne, Inc.

Sue L. Robinson (formerly of the Dept. of Justice, argued) and David Weiss of the Dept. of Justice, Wilmington, Del., for defendant U.S.

OPINION

LONGOBARDI, District Judge.

Jones Motor Co., Inc. ("Jones Motor"), a motor common carrier of property, filed its complaint on or about August 21, 1986, against Teledyne, Inc. ("Teledyne") and the United States Government ("United States" or "Government") for breach of contract seeking damages in the amount of $62,100. Plaintiff contends that jurisdiction against the United States is based upon 28 U.S.C. § 1346 (the "Tucker Act"). As to Teledyne, jurisdiction is based upon 28 U.S.C. § 1332. Teledyne answered the complaint and cross-claimed against the Government seeking to have the Government indemnify and hold harmless Teledyne.

The Government answered the complaint and cross-claimed by asserting lack of subject matter jurisdiction over both Jones Motor's claim and Teledyne's cross-claim. Docket Item ("D.I.") 8. Presently before the Court is the Government's motion for summary judgment based upon its jurisdictional defenses. The United States first contends that this Court is divested of jurisdiction over both parties' suits under the Contract Disputes Act of 1978, 41 U.S.C. §§ 601-613 ("the Act"). Secondly, the Government argues that if the Act does not apply, both Jones Motor and Teledyne's claims should be dismissed for the amount in controversy exceeds the Tucker Act's jurisdictional maximum of $10,000. The Court will address the Government's arguments seriatim.

Teledyne and the United States, acting through its Army Tank Automotive Command, entered into Contract No. DAAE07-82-C-0202 (the "Prime Contract"). D.I. 7. The Prime Contract was for production of an initial quantity of 1,277 tank engine assemblies, Mode AVDS Series 1790, for delivery as specified by the contract. D.I. 19, Affidavit of James Young attached. Of these engine assemblies, 323 were ordered on behalf of and for delivery to the Republic of Turkey pursuant to a Foreign Sales Agreement. Id. According to the terms of the Prime Contract, the engine assemblies were to be shipped in accordance with the instructions of the Administrative Contracting Officer or his duly authorized representative. D.I. 7. As required by the Prime Contract, Teledyne sought instructions for the shipments. Among other things, Teledyne was instructed to issue commercial bills of lading "Third Party Billing." D.I. 7, Exhibit D. The bills of lading were to be annotated with "TRANSPORTATION CHARGES ARE GUARANTEED BY TRANSPORTATION OFFICE, DCASMA GRAND RAPIDS, 678 FRONT ST., N.W., GRAND RAPIDS, MI 49504." Id.

On October 3, 1985, Jones Motor transported some of the engine assemblies that were ordered on behalf of and for the Republic of Turkey. D.I. 1. Jones Motor delivered the goods pursuant to the bill of lading and charged Teledyne $1,150 for the services. Jones Motor provided the identical services for Teledyne on 53 separate occasions during the period October 3, 1985, through December 11, 1985. Id. Jones Motor billed the same rate for its services and each shipment was done pursuant to a separate bill of lading. Id. Jones Motor has not been paid for any of its deliveries and, as such, is owed a total of $62,100 ($1,150 × 54), plus any accrued interest.

Jones Motor instituted this action in order to collect payment either from Teledyne or from the United States based upon the guaranty found on each bill of lading. Neither Jones Motor nor Teledyne have filed a claim in accordance with the Act with the Administrative Contracting Officer in regard to this dispute. D.I. 19.

The Government's first basis for its summary judgment motion is that the Act divests this Court of jurisdiction. The Government first directs the Court's attention to the legislative history of the Act to show that Congress intended to encourage resolution of contract disputes through negotiation. D.I. 29 at 8, citing Great Lakes Educ. Consultants v. Fed. Emerg. Manage., 582 F.Supp. 193 (W.D.Mich.1984); S.Rep. No. 95-1118, 95th Cong., 2d Sess. 1 (1978), reprinted in 1978 U.S.Code Cong. & Admin. News 5235. The Government argues further that the Act, in fact, divests the district courts of jurisdiction¹ and that the "district courts play no role whatsoever in the Act's dispute resolution mechanism." D.I. 19 at 9. Finally, as it must in order to make its argument complete, the Government contends that the contracts at issue are covered by the Act. D.I. 24.

The Act states that, unless provided otherwise, it covers:

any express or implied contract ... entered into by an executive agency for—

(1) the procurement of property, other than real property in being;

(2) the procurement of services;

(3) the procurement of construction, alteration, repair or maintenance of real property; or

(4) the disposal of personal property.

41 U.S.C. § 602(a). By its own terms, the Act was not intended to apply to every government contract. Coastal Corp. v. United States, 713 F.2d 728, 730 (Fed.Cir. 1983).² In Coastal Corp. the Federal Circuit rejected the proposed gloss on 41 U.S.C. § 602(a) which would make the Act applicable not only to the particular kinds of contracts specified therein, but also to "other contracts tangentially connected with government procurement of goods and services." Id. Thus the Appellate Court refused to apply the Act to an implied contract to treat bids fairly stating that "Congress explicitly specified the types of contract that it intended the Act to cover." Id. Consequently, the initial question before this Court is whether the guaranties made by the United States and printed on each bill of lading is a contract which falls under the Act.³

By definition, a guaranty by the United States is not covered by the Act. A guaranty is defined as "a collateral agreement for performance of another undertaking. An undertaking or promise that is collateral to primary or principal obligation that binds guarantor to performance in event of nonperformance by the principal obligor." Black's Law Dictionary (5th Ed.1979). See General Overseas Films, Ltd. v. Robin Intern., Inc., 542 F.Supp. 684 (S.D.N.Y. 1982), aff'd, 718 F.2d 1085 (2nd Cir.1983) (a guaranty is "collateral to the debt itself."); Financeamerica, Etc. v. Harvey E. Hall, Inc., Del.Super., 380 A.2d 1377, 1379 (1977) ("a contract of guaranty is the promise to answer for the payment of some debt or the performance of some obligation by another on the default of that third person who is liable in the first instance.");⁴ Cargill, Inc. v. Buis, 543 F.2d 584, 587 (7th Cir.1976) (Indiana law defines a guaranty as "a collateral promise ... by one person to answer for the payment of some debt ... (in case of default) of another person liable therefore in the first instance."); Roxbury State Bank v. The Clarendon, 129 N.J.Super. 358, 324 A.2d 24, 33 (1974) ("a guaranty is an agreement to be answerable personally for the debt of another."). Consequently, the hallmarks of a guaranty are that it is collateral to the first obligation and it is different from the basic contract to which it is collateral.

Before this Court are the contracts between Jones Motor and Teledyne for the delivery of engine assemblies manifested by bills of lading. These are the principle contracts. The Government's guaranty contract for the payment of transportation charges is obviously collateral to each one. Whereas Teledyne contracted to procure the service of transporting goods from Jones Motor, the Government's guaranty contract is collateral to and different in substance from this principle contract. The Government's collateral obligation was a promise to perform in the event of Teledyne's nonperformance of its obligation. The Army Tank Automotive Command did not enter into an express or implied contract with Jones Motor for the delivery of the tank engine assemblies. Rather, the Government promised to pay Jones Motor in the event that Teledyne failed to comply with its obligations imposed by the contract between it and Jones Motor. As such, this Court cannot consider the Government's guaranty contract as a contract for the procurement of services.⁵ The guaranty contract may be collaterally related to a contract for the procurement of services but this is not enough to bring it under the Act. Furthermore, the Supreme Court has stated that the consignor (here the shipper, Teledyne) is originally liable for the carrier's charges unless noted otherwise on the bill of lading. Southern Pac. Transp. Co. v. Commercial Metals, 456 U.S. 336, 343, 102 S.Ct. 1815, 1820, 72 L.Ed.2d 114 (1982), citing In re Bills of Lading, 52 I.C.C. 671, 721 (1919). The Government's position here, however, would seem to contradict this proposition since it is asking this Court to find that the Government's guaranty on the bill of lading brings this action under the Act even though Teledyne and Jones Motor are the contracting parties and Teledyne is originally liable for the charges.

Secondly, case law analogous to the claim before this Court suggests that a guaranty contract is not covered by the Act. None of the parties has presented case law to the Court directly on point. Jones Motor, however has directed the Court's attention to two decisions holding that a construction-differential subsidy ("CDS") is not a contract covered by the Act. The Plaintiff contends that ...