Quality Tooling, Inc. v. U.S.

• Decision Date: 31 January 1995
• Docket Number: No. 93-1234,93-1234
• Citation: 47 F.3d 1569
• Parties: , Bankr. L. Rep. P 76,362, 40 Cont.Cas.Fed. (CCH) P 76,744 QUALITY TOOLING, INC., Plaintiff-Appellee, v. The UNITED STATES, Defendant-Appellant.
• Court: U.S. Court of Appeals — Federal Circuit

Page 1569

47 F.3d 1569

63 USLW 2478, Bankr. L. Rep. P 76,362,

40 Cont.Cas.Fed. (CCH) P 76,744

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

No. 93-1234.

United States Court of Appeals, Federal Circuit.

Jan. 31, 1995.

Rehearing Denied; Suggestion for Rehearing In Banc

Declined June 16, 1995. ^*

E. Mabry Rogers, Bradley, Arant, Rose & White, Birmingham, AL, argued for plaintiff-appellee. With him on the brief was John J. Park, Jr.

John K. Lapiana, Atty., Commercial Litigation Branch, Dept. of Justice, Washington, DC, argued for defendant-appellant. With him on the brief were Stuart E. Schiffer, Acting Asst. Atty. Gen., David M. Cohen, Director and Bryant G. Snee, Asst. Director. Also on the brief was Capt. Timothy Saviano, General Litigation Branch, Dept. of the Army, Arlington, VA. Of counsel was Thomas W. Petersen.

Before PLAGER and SCHALL, Circuit Judges, and PRATT, ^* Senior Circuit Judge.

PLAGER, Circuit Judge, with whom PRATT, Senior Circuit Judge, joins.

This case requires us to reconcile the jurisdiction of the United States Court of Federal The District Court for the Northern District of Alabama, sitting in bankruptcy, determined that it possessed subject matter jurisdiction to entertain a complaint seeking declaratory and monetary relief based upon a contract in a dispute otherwise governed by the exclusive provisions of the Contract Disputes Act of 1978, Pub.L. No. 95-563, 92 Stat. 2383 (1978) (CDA). The District Court then denied the Government's motion to transfer the cause to the Court of Federal Claims. The United States has taken this appeal pursuant to 28 U.S.C. Sec. 1292(d)(4)(A), ¹ which permits appeals to this court from interlocutory orders of a district court denying, in whole or in part, a motion to transfer an action to the Court of Federal Claims under 28 U.S.C. Sec. 1631 (dealing with transfers to cure want of jurisdiction).

Claims over contract disputes to which the Federal Government is party with the power of the United States District Court, sitting in bankruptcy, to bring all matters affecting the bankrupt's estate into one proceeding. This is a case of first impression in this court.

We conclude that in a case such as this, Congress gave concurrent jurisdiction to both the District Court, under the Bankruptcy Act of 1978, Pub.L. No. 95-598, 92 Stat. 2549, codified as amended as Title 11 of the United States Code (Bankruptcy Act), and the Court of Federal Claims, under the Contract Disputes Act. The initial decision as to which is the proper forum to resolve a particular contract dispute is for the District Court, applying the proper standards. The cause is remanded to the District Court with instructions to reconsider its denial of the transfer motion in light of these standards.

BACKGROUND

The United States Army (Army) contracted with Quality Tooling, Inc. (Quality) for the manufacture of certain parts required by the Army for a missile system. The parties to the contract had a falling out over Quality's performance (or lack of it), and were unable to settle the dispute amicably. The Army terminated the contract for default on October 11, 1990, and informed Quality that it owed the Government for losses that, the Army alleged, had been caused by Quality's default.

Quality then brought suit against the Government in the Court of Federal Claims ² pursuant to the Tucker Act, 28 U.S.C. Sec. 1491, and the Contract Disputes Act of 1978, 41 U.S.C. Sec. 609 (CDA), one of the established routes for resolution of a government contract dispute. In its suit Quality alleged that the Army had in fact terminated the contract for the convenience of the government, that the Army was therefore not entitled to recover damages as a result of a default, and that Quality was due money both under the termination for convenience clause and for incidental expenses. ³ While the contract dispute was pending before the Court of Federal Claims, Quality petitioned the District Court of the District of Columbia for protection under Chapter 11 of the Bankruptcy Act. At Quality's request, Quality's bankruptcy case was subsequently transferred to the District Court for the Northern District of Alabama, where Quality is located. After a series of moves and countermoves by the parties, Quality's contract claim against the United States, pending in the Court of Federal Claims, ended up in the hands of the District Court for the Northern District of Alabama, sitting in bankruptcy.

The Government then moved, pursuant to 28 U.S.C. Sec. 1631, to transfer the contract dispute back to the Court of Federal Claims, arguing that the District Court, sitting in bankruptcy, was without jurisdiction to try

the issue, and that the proper forum for resolution of the contractual claims was the Court of Federal Claims. The District Court denied the Government's motion. The Government duly appealed the denial to this court pursuant to 28 U.S.C. Sec. 1292(d)(4), which establishes this court's jurisdiction over interlocutory appeals from the grant or denial of a motion to transfer a case from a district court to the Court of Federal Claims.

DISCUSSION

I. The transfer from the Court of Federal Claims to the District Court for the Northern District of Alabama.

As a preliminary matter, the Government argues that this case was improperly transferred under 28 U.S.C. Sec. 1452 from the Court of Federal Claims to the District Court in Alabama sitting in bankruptcy. In the Government's view, that provision permits transfer only from state courts to a bankruptcy court, and a transfer from a federal court of nationwide jurisdiction to a district court is not authorized. In support of the Government's argument, it is noted that Sec. 1452 is the last of a number of sections codified in chapter 89 under the title: "District Courts: Removal of Cases from State Courts," and each of the other sections--1441 through 1451--deals expressly with actions commenced in state courts.

But Sec. 1452 does not refer to actions commenced in state courts. It states simply that "[a] party may remove any claim or cause of action in a civil action" to a district court sitting in bankruptcy. There are two stated exceptions: (i) the proceeding may not be before the United States Tax Court; and (ii) the claim may not be a civil action by a governmental unit to enforce the unit's police or regulatory power.

The specific exclusion of transfers from the United States Tax Court hardly would be necessary if Sec. 1452 dealt only with transfers from state courts. Had Congress wanted to exclude other federal courts, including the Court of Federal Claims, it could have said so. The Tax Court and the Court of Federal Claims are both Article I courts of nationwide jurisdiction. The Government's argument--that the terms of the statute suffice to exclude courts of national jurisdiction--would make the express exclusion of the Tax Court superfluous.

Enacted as part of the 1984 amendments to the Bankruptcy Act, Bankruptcy Amendments of 1984, Pub.L. No. 98-353, title I, Sec. 103(a), 98 Stat. 333, 335 (1984), section 1452 is designed to address removal of claims related to bankruptcy cases, and to provide for transfer of such claims to the district courts sitting in bankruptcy. Nothing in the language of the section suggests a limit on the courts from which transfer is authorized, other than the two specific exceptions noted, neither of which applies to the case of Quality. ⁴ The Government notes that the legislative history of Sec. 1452 lacks any debate or deliberation concerning the removability of Court of Federal Claims actions to a bankruptcy court, and that apparently there has been no recorded occasion in which an action was removed from the Court of Federal Claims to a federal district court. The absence of legislative history on the subject hardly proves the negative, and there is a first time for everything. We conclude that 28 U.S.C. Sec. 1452 is not limited by its terms to removing a claim from a state court, and that the transfer here was properly authorized.

II. The jurisdiction of the District Court and of the Court of Federal Claims over the dispute arising out of the supply contract between Quality and the Army.

The Government points out that Quality founded its contract dispute suit upon Sec. 1491 of Title 28, United States Code, the Tucker Act, and Sec. 609(a) of Title 41, which is Sec. 10(a)(1) of the Contract Disputes Act (CDA). The Government is correct that the Tucker Act, in conjunction with the CDA, purports to make the Court of Federal Claims the exclusive trial court for hearing disputes over government contracts that fall under the CDA. See 28 U.S.C. Secs. 1346(a)(2), 1491(a)(2). Exclusive appellate jurisdiction over such suits (as well as those which follow the alternate route through an agency board of contract appeals) is in the Court of Appeals for the Federal Circuit. 28 U.S.C. Sec. 1295(a)(3), (a)(10).

But Quality is also correct in contending that when Congress passed the Bankruptcy Act, it anticipated that there would be claims involving a bankrupt's estate that, by statute, were assigned exclusively to some court other than a district court. Congress, wishing to give the district court sitting in bankruptcy plenary authority over the bankrupt's estate and all claims by or against it, expressly provided that the district court would have concurrent jurisdiction over all claims, even those which by statute were within the exclusive jurisdiction of other federal courts:

Notwithstanding any Act of Congress that confers exclusive jurisdiction on a court or courts other than the district courts, the district courts shall have original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11.

28 U.S.C. Sec. 1334(b). That Congress intended what the statute states is reinforced by the legislative history:

There are several...