M.K. Ferguson Co. v. United States
| Decision Date | 14 April 2016 |
| Docket Number | No. 12-57 C,12-57 C |
| Parties | M.K. FERGUSON COMPANY, for the use and benefit of the secured creditors of GROUND IMPROVEMENT TECHNIQUES, INC.; PNC BANK, N.A.; FIREMAN'S FUND INSURANCE COMPANY; and R.N. ROBINSON & SONS, INC., Plaintiffs, v. THE UNITED STATES, Defendant. |
| Court | U.S. Claims Court |
Contracts; RCFC 12(b)(1); RCFC 12(b)(6); Defective Certification of Claim; Severin Doctrine; Allowable Contract Costs.
Robert G. Barbour, McLean, VA, for plaintiffs. Keith C. Phillips, McLean, VA, of counsel.
Jeffrey A. Regner, United States Department of Justice, with whom were Benjamin C. Mizer, Principal Deputy Assistant Attorney General, Robert E. Kirschman, Jr., Director, Steven J. Gillingham, Assistant Director, Washington, DC, for defendant.
The court has before it the government's motion to dismiss brought under Rules 12(b)(1) and 12(b)(6) of the Rules of the United States Court of Federal Claims (RCFC). Defendant's motion has been fully briefed. Oral argument was neither requested by the parties nor required by the court. For the reasons set forth below, defendant's motion is denied.
Most of the relevant background for this dispute may be found in Ground Improvement Techniques, Inc. v. United States, 108 Fed. Cl. 162 (2012) (GIT I), Ground Improvement Techniques, Inc. v. United States, No. 12-57C (Fed. Cl. May 3, 2013) (GIT II), Ground Improvement Techniques, Inc. v. United States, No. 12-57C (Fed. Cl. April 30, 2014) (GIT III), and Ground Improvement Techniques, Inc. v. United States, 618 F. App'x 1020 (Fed. Cir. 2015) (GIT IV). Only the facts essential to the dispute currently before the court are presented here. In 1995, Ground Improvement Techniques, Inc. (GIT) became the subcontractor for MK-Ferguson Company (MK) on a United States Department of Energy project in Slick Rock, Colorado (the DOE project) for the remediation of uranium mill tailings.2 As a result of a contract dispute, GIT eventually won a judgment against MK in a federal court, a portion of which remains unsatisfied. It is that unsatisfied portion of the judgment against MK that underlies the claim in plaintiffs' amended complaint.
In 2001, MK filed for bankruptcy under Chapter 11 of the Bankruptcy Code, in the United States Bankruptcy Court for the District of Nevada (the MK bankruptcy litigation). The unsatisfied portion of GIT's judgment against MK, and post-judgment interest, were claims administered in MK's bankruptcy. The bankruptcy court required MK to file a certified claim with DOE to attempt to satisfy GIT's claims against MK related to the DOE project. MK did so in 2010, but the certification was contested as inadequate.
MK very recently corrected its certification of GIT's claim to comply with claim certification requirements under the Contract Disputes Act of 1978, 41 U.S.C. §§ 7101-7109 (2012) (CDA). Pls.' App. Ex. 3. The type of claim presented in this suit is sometimes referred to as a pass-through claim, where the prime contractor certifies the claim of the subcontractor and sponsors that claim under its own name. Because GIT also went through bankruptcy, any proceeds from GIT's claim will be paid to the assignees of that claim in GIT's bankruptcy, usually referred to as the "Secured Parties."3 Those assignees are indicated in the caption of this case by the term "secured creditors" of GIT. See Order of October 7, 2015.
There are three basic arguments which provide the foundation for defendant's motion to dismiss presently before the court. Def.'s Mot. at 3-4. The government's first jurisdictional argument essentially contends that the pass-through claim asserted in the amended complaint was never properly certified to the contracting officer and that the defects in certification are so grave that they cannot be cured. The government's second argument, relying on RCFC 12(b)(1) and RCFC 12(b)(6) and citing Severin v. United States, 99 Ct. Cl. 435 (1943), contends that because MK is not liable for GIT's claim, MK cannot sponsor GIT's claim before this court. In the alternative, defendant argues that the costs presented in MK's pass-through claim are not allowable costs pursuant to MK's contract with DOE; thus, in the government's view, the claim set forth in the amended complaint fails as a matter of law.
In rendering a decision on a motion to dismiss for lack of subject matter jurisdiction pursuant to RCFC 12(b)(1), this court must presume all undisputed factual allegations to be true and construe all reasonable inferences in favor of the plaintiff. Scheuer v. Rhodes, 416 U.S. 232, 236 (1974), abrogated on othergrounds by Harlow v. Fitzgerald, 457 U.S. 800 (1982); Reynolds v. Army & Air Force Exch. Serv., 846 F.2d 746, 747 (Fed. Cir. 1988). However, the plaintiff bears the burden of establishing subject matter jurisdiction. Alder Terrace, Inc. v. United States, 161 F.3d 1372, 1377 (Fed. Cir. 1998) (citing McNutt v. Gen. Motors Acceptance Corp. of Ind., 298 U.S. 178, 189 (1936)). To meet this burden, the plaintiff must establish jurisdiction by a preponderance of the evidence. Reynolds, 846 F.2d at 748 (citations omitted).
It is well-settled that a complaint should be dismissed under RCFC 12(b)(6) "when the facts asserted by the claimant do not entitle him to a legal remedy." Lindsay v. United States, 295 F.3d 1252, 1257 (Fed. Cir. 2002). When considering a motion to dismiss brought under RCFC 12(b)(6), "the allegations of the complaint should be construed favorably to the pleader." Scheuer, 416 U.S. at 236. The court must not mistake legal conclusions presented in a complaint, however, for factual allegations which are entitled to favorable inferences. See, e.g., Papasan v. Allain, 478 U.S. 265, 286 (1986) () (citations omitted).
The court must also determine whether a complaint meets the plausibility standard described by the United States Supreme Court, i.e., whether it adequately states a claim and provides a "showing [of] any set of facts consistent with the allegations in the complaint." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 563 (2007) (Twombly) (citations omitted). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (Iqbal) (quoting Twombly, 550 U.S. at 570). Plausibility is a context-specific inquiry. See, e.g., Iqbal, 556 U.S. at 679 () (citation omitted).
As ordered by the judge in the MK bankruptcy litigation, MK certified GIT's subcontractor claim on October 22, 2010 and provided that certification, with supporting documents, to the contracting officer on the DOE project. That certification statement contains the following language:
Am. Compl. Ex. 4 at 26. The claim amount was for $9,842,711.83. Id. at 27.
There is no real dispute that an effective certification for a nine million dollar claim must include four elements prescribed by the CDA. The contractor must certify that:
41 U.S.C. § 7103(b). Only the last of those four elements is clearly present in the certification letter provided by MK on October 22, 2010. Unless the court orders issued by the bankruptcy court could relieve MK of its certification burden, it is clear that the October 22, 2010 certification is not sufficient under the CDA.
The court need not decide whether such a certification under court order, or a subsequent certification under court order submitted in MK's name but not authorized by MK, could ever be sufficient to certify a CDA claim. MK, on December 22, 2015, provided a second certification to the contracting officerwhich stated, in relevant part, that:
On behalf of URS Energy & Construction, Inc., successor to Morrison Knudson Company d/b/a MK Ferguson Company, I hereby certify that the pass-through claim of Ground Improvement Technologies, Inc. for the judgment amount of $9,842,711.83, plus interest from August 16, 2006, is made in good faith; that the supporting data are accurate and complete to the best of my knowledge and belief; that the amount requested accurately reflects the contract adjustment for which the contractor believes the Government is liable; and that I am duly authorized to certify the claim on behalf of URS Energy & Construction, Inc.
Pls.' App. at 22. The December 22, 2015 certification submitted by MK contains all four elements required by the CDA.
Defendant does not argue that the December 22, 2015 certification is itself defective. In the court's view, the December 22, 2015 certification cures the defects in MK's October 22, 2010 certification. The submission of a corrected and proper certification normally ends the court's inquiry into the certification issue because it is well-established that a defective certification can be...
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