Management Science America, Inc. v. Pierce

• Decision Date: 27 November 1984
• Docket Number: Civ. No. C84-1959.
• Citation: 598 F. Supp. 223
• Parties: MANAGEMENT SCIENCE AMERICA, INC. v. Samuel R. PIERCE, Jr., Secretary of the United States Department of Housing & Urban Development.
• Court: U.S. District Court — Northern District of Georgia

598 F. Supp. 223

MANAGEMENT SCIENCE AMERICA, INC. v. Samuel R. PIERCE, Jr., Secretary of the United States Department of Housing & Urban Development.

Civ. No. C84-1959.

United States District Court, N.D. Georgia, Atlanta Division.

November 27, 1984.

Charles E. Campbell, Hicks, Maloof & Campbell, Atlanta, Ga., for plaintiff.

Nina L. Hunt, Asst. U.S. Atty., Atlanta, Ga., for defendant.

ORDER

ORINDA D. EVANS, District Judge.

This case is before the court on Defendant's motion to dismiss or in the alternative for summary judgment.

FACTS

This action involves a contract between Plaintiff Management Science America ("MSA"), a developer and manufacturer of computer software, and the Department of Housing and Urban Development ("HUD"), an agency of the United States Government. Under the contract, MSA was to install, demonstrate and test a package of accounting systems software for HUD's IMB and Sperry computer systems. This dispute concerns the software programs, or "modules," for the Sperry system only.

The contract was executed September 30, 1982, and had an original completion date of October 1, 1983. MSA apparently did not deliver the modules by October 1. HUD did not terminate the contract, however, and in April 1984, agreed to amend the contract to set a new delivery date of July 31, 1984. At the time of amendment, HUD advised MSA that the agency would exercise its right to terminate the contract if MSA did not have a tested and operational system installed by the new July deadline.

MSA successfully installed three of the four modules in April and May of 1984. The facts surrounding MSA's attempts to install the fourth module and test the system at the end of July are in controversy. HUD contends that MSA failed to successfully install and demonstrate a working module despite MSA's efforts from July 29 to August 3, 1984. MSA maintains that it was prevented from making installation by HUD's failure to provide proper access to the computer and by the daily deletion of MSA's work by HUD employees.

It is undisputed, however, that the system was never successfully installed and tested on the HUD computer. On August 14, 1984, the HUD contracting officer, Mr. Kenneth Dosier, issued a final decision terminating for default that portion of the contract relating to the Sperry modules. Plaintiff contends that Mr. Dosier's decision was made arbitrarily and capriciously, in that he failed to review all pertinent facts and did not exercise his independent judgment in making the termination. After reviewing additional information supplied by MSA regarding the alleged installation difficulties, Mr. Dosier informed MSA on September 14, 1984 that he saw no reason to change his decision.

On September 26, 1984, MSA filed this action for injunctive relief against the Secretary of HUD, Mr. Samuel R. Pierce, Jr. MSA seeks an injunction barring Defendant and his agents from "proceeding with any action preventing the performance by Plaintiff of the Contract" and from awarding the contract to another company. Complaint, pp. 7-8. MSA also seeks an order enjoining Defendant from disseminating or disclosing any of MSA's trade secrets now in Defendant's control.

Although MSA initially asked for a temporary restraining order against Defendant, the parties subsequently agreed to maintain the status quo until further order of the court. Consent Order of October 1, 1984. Defendant then filed this motion to dismiss or in the alternative for summary judgment. A hearing was held on Defendant's motion to dismiss on October 11, 1984.

JURISDICTION

Count One of Plaintiff's complaint alleges that this action arises under the Fifth Amendment to the United States Constitution and the laws of the United States, and that this court therefore has jurisdiction under 28 U.S.C. § 1331(a).¹ Plaintiff then alleges that it is entitled to judicial review of the agency's action under 5 U.S.C. § 702.²

Defendant contests the Plaintiff's claim of subject matter jurisdiction, on the grounds that Plaintiff's claim is grounded in contract and is therefore within the exclusive jurisdiction of the United States Claims Court or the HUD Board of Contract Appeals under the Contract Disputes Act of 1978, 41 U.S.C. § 601, et seq. ("CDA"). Defendant argues that Plaintiff cannot circumvent that exclusive jurisdiction by attempting to sue under § 1331(a) and the Administrative Procedure Act ("APA"), § 702.

Plaintiff argues in response that Defendant has failed to comprehend the jurisdictional basis of its complaint. Plaintiff contends that the essence of its action is a claim that HUD officials violated federal procurement regulations in acting arbitrarily, capriciously and illegally in the performance of official functions, i.e., terminating the contract.³ Plaintiff denies that it is seeking either money damages or an order imposing a burden on the Government for performance of some specific function. Plaintiff maintains that it is instead seeking "an injunction against certain Government officials which will operate to permit MSA to complete performance of an act which it and its subcontractors are capable of performing which will serve to benefit the Government." Plaintiff Brief in Response, p. 5.

Plaintiff asserts that this court's acceptance of the Government's position would deprive MSA of a forum in which to obtain that injunctive relief, because the United States Claims Court is statutorily proscribed from awarding the relief Plaintiff seeks. Plaintiff then discusses at length the jurisdictional statutes governing the Claims Court and the federal district courts, and concludes that nothing in those statutes or the CDA bars the district court from providing this sort of relief.

With the enactment of the Contract Disputes Act of 1978, Congress provided a comprehensive statutory system of legal and administrative remedies to resolve all disputes arising from government contracts. The CDA provides for appeals to either the agency board of contract appeals⁴ or to the United States Claims Court,⁵ and specifically abolishes the jurisdiction of the federal district courts to hear claims "founded upon any express or implied contract with the United States" which is subject to the CDA.⁶ The Senate report accompanying the CDA states the intent of Congress in no uncertain terms:

Section 10(a) is amended by allowing contractors with suits against the Government (excluding the Tennessee Valley Authority) to bring direct action only in the Court of Claims. U.S. district court jurisdiction is eliminated from Government contract claims.

S.Rep. No. 1118, 95th Cong.2d Sess., reprinted in 1978 U.S.Code Cong. & Ad. News 5235, 5244.

Plaintiff acknowledges that § 1346 does not confer on the district court subject matter jurisdiction over contract actions seeking equitable relief. It also acknowledges that under the CDA all contract claims for damages must be brought before the U.S. Claims Court. Plaintiff instead seeks to avoid these jurisdictional barriers by arguing that its cause of action is statutory rather than contractual, thereby placing it outside Congress' clear mandate on contractual claims. As a claimant alleging arbitrary agency action in violation of statute, Plaintiff therefore argues that it is entitled to judicial review of its claims in this court under 5 U.S.C. § 702 and 28 U.S.C. § 1331.

This court's jurisdiction over those claims therefore turns on whether Plaintiff's action is essentially contractual or statutory in nature. The courts have repeatedly held that a government contractor cannot evade the jurisdiction of the Claims Court and its limited damages remedy by characterizing his claim as other than contractually based. Megapulse, Inc. v. Lewis, 672 F.2d 959, 967 (D.C.Cir.1982).⁷ The court in Megapulse suggested the following guidelines for making that determination:

The classification of a particular action as one which is or is not "at its essence" a contract action depends both on the source of the right on which the plaintiff bases its claims, and upon the type of relief sought (or appropriate).

672 F.2d at 968.

The court finds that Plaintiff's action is essentially contractual. Although Plaintiff insists that it seeks merely an injunction to maintain the status quo, Plaintiff actually is seeking fifteen uninterrupted hours on the HUD computer to demonstrate its software. At the October 19 hearing, Plaintiff conceded this court could not grant it the relief it seeks without reinstating or declaring valid the contract which was terminated by HUD. The action is therefore not brought merely to restrain the wrongful actions of government officials, but to order the United States to perform the contract.

Plaintiff also argues that the source of its claims is not the contract dispute with HUD per se, but alleged violations of the federal procurement regulations. However, those violations are peripheral to the central grievance of Plaintiff's complaint, which is the wrongful termination of the contract for default. At the hearing, Plaintiff suggested three grounds on which this court could grant it relief: (1) waiver by Defendant; (2) absence of a breach by Plaintiff; (3) failure of the contracting officer to render an independent judgment. The first two theories are obviously contract defenses, while the third is insufficient to render Plaintiff's claims statutory in nature, rather than contractual.

If the mere allegation of procurement violations were to bring claims of this type within the jurisdiction of the district court, Congress' intent to limit contract remedies against the government to damages in the Claims Court would be effectively circumvented. As the former Fifth Circuit has stated:

Since the United States by reason of its nature acts only through agents, it is hard to conceive of a claim falling no matter how squarely within the Tucker Act which could not be urged to involve as well agency error subject to review under the

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