Rick's Mishroom Services, Inc. v. U.S.

• Decision Date: 02 April 2008
• Docket Number: No. 2007-5137.,2007-5137.
• Citation: 521 F.3d 1338
• Parties: RICK'S MUSHROOM SERVICE, INC., Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

521 F.3d 1338

RICK'S MUSHROOM SERVICE, INC., Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee.

No. 2007-5137.

United States Court of Appeals, Federal Circuit.

April 2, 2008.

Jonathan J. Bart, Wilentz, Goldman & Spitzer, P.A., of Philadelphia, Pennsylvania, argued for plaintiff-appellant.

Joan M. Stentiford, Trial Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for defendant-appellee. With her on the brief were, Jeanne F. Davidson, Director, and Steven J. Gillingham, Assistant Director.

Before RADER, LINN, and PROST, Circuit Judges.

PROST, Circuit Judge.

This is an appeal from the United States Court of Federal Claims pertaining to a cost-share agreement between the government and Rick's Mushrooms, Inc. ("Rick's") for implementing conservation practices in a facility for recycling of mushroom waste. Rick's seeks indemnification from the government for costs incurred in defending and settling claims by a third party for violation of certain state and federal environmental laws. The Court of Federal Claims dismissed the action for lack of subject matter jurisdiction. For the reasons set forth below, we affirm.

I

Mushroom farming is a major economic activity in Chester County, Pennsylvania. Historically, the organic by-product waste of mushroom farming, known as "spent mushroom substrate" ("SMS"), was dumped in nearby woods or streams, resulting in severe nitrogen pollution. Rick's operates an SMS transfer facility, which processes SMS by leaching out the excess nitrogen and then recycling it as potting soil or other products.

The Natural Resources Conservation Service ("NRCS") was created by the Department of Agriculture Reorganization Act of 1994. The NRCS is specifically charged to cooperate with state and local soil and water conservation districts to carry out improvements under the Watershed Protection and Flood Prevention Act. As such, the NRCS has a cooperative arrangement with the Red-White Clay Creeks Watershed Protection Plan, which includes the region where Rick's SMS transfer facility is located. The NRCS is also authorized to enter into cost-share agreements with landowners or land occupiers to carry out conservation plans approved by the local soil and water conservation districts.

In 1996, M.A.Y. Farms, Inc. ("M.A.Y.Farms"), as a prospective purchaser of the property where Rick's is now located, consulted with the Pennsylvania Department of Environmental Protection ("PDEP") and the NRCS regarding what was necessary to operate an SMS transfer facility at that location. The NRCS required that the property be cleaned of existing SMS and that whoever operated the SMS transfer facility enter into a contract for construction of an environmentally sensitive SMS transfer facility. Thereafter, Custom Casings, Inc. ("Custom Casings"), the corporate predecessor to Rick's, entered into a long-term lease with M.A.Y. Farms, the then owner of the property, and cleaned the property of existing SMS.

On September 26, 1997, the NRCS, after consultation with the PDEP and the Chester County Conservation District ("CCCD"), entered into a "Long-Term Contract for NRCS Cost Share Programs" with Custom Casings. J.A. 113-16. Pursuant to the contract, NRCS designed and provided specifications for conservation practices to be implemented at the transfer facility, including a storage area, leaching field, wastewater impoundment and spray system. Custom Casings was to install the components and operate the facility.

On July 26, 2001, Warren and John Reynolds, Rick's neighbors, and the Wilmington Trust Company ("Reynolds") filed suit against Rick's in the United States District Court for the Eastern District of Pennsylvania, alleging that Rick's operated the SMS transfer facility in violation of the Clean Water Act and the Pennsylvania Clean Streams Law, and that wastewater runoff from Rick's was entering a stream and contaminating the Reynolds's pond. In March 2004, the district court issued a permanent injunction requiring Rick's to obtain PDEP permits as a wastewater and solid waste facility. Reynolds v. Rick's Mushroom Serv. Inc., No. Civ.A. 01-3773, 2004 WL 620164, at *9 (E.D.Pa. Mar.29, 2004). The court found that the CCCD had developed a Mushroom Farm Environmental Management Plan ("MFEMP"), and that Rick's failure to comply with some of the operational requirements of the MFEMP had caused the contamination on Reynolds's property.¹ Id. at *2-5.

After the order by the district court, Rick's agreed to settle the case for $950,000. Thereafter, the NRCS drafted a rehabilitation plan and a plan for a roof structure to help eliminate some of the problems with waste discharge. The NRCS did not indemnify Rick's for its losses in the litigation and did not pay for the new roof structure.

On November 4, 2005, Rick's submitted a claim under the Contract Disputes Act ("CDA") to the contracting officer at the NRCS for $5 million in damages. J.A. 188-39. The claim alleged that the NRCS had breached its implied warranty of the specifications, and, as a consequence, Rick's had incurred additional costs, including attorneys' fees in defending the lawsuit brought by the Reynolds; the lost value of its contribution to the original design, its substantial design revisions, and the installation of the new roof structure; and its liability for environmental impact. J.A. 188-89. The NRCS contracting officer denied the claim, stating that because the contract was not a procurement contract for goods or services, but rather a cooperative agreement, the CDA was inapplicable. Id. at 138.

Rick's then filed suit in the Court of Federal Claims alleging that the Reynolds lawsuit and settlement was due to defective specifications drafted by the NRCS and that the NRCS should be liable for the costs incurred in the lawsuit. Rick's Mushroom Serv., Inc. v. United States, 76 Fed.Cl. 250, 254 (2007). Rick's had three legal theories for recovery: Count I, equitable indemnification based on an implied-in-fact warranty arising under the Spearin doctrine;² Count II, breach of contract; and Count III, professional negligence. Id. First, the court determined that Rick's had satisfied the administrative exhaustion requirements, at least with respect to Count I, because Rick's claim based on an implied-in-fact contract under the CDA had been submitted to the contracting officer for a final decision. Id. at 256. Nevertheless, the court held that it lacked jurisdiction over Rick's professional negligence claim because it was a claim sounding in tort. Id. The court further held that, because the contract between Rick's and the NRCS was a cooperative agreement and not a procurement contract, there was no basis for jurisdiction under the CDA for the breach of contract claim. Id. at 258. Finally, the court rejected the claim for equitable indemnification under the Spearin doctrine because it was precluded by the Anti-Deficiency Act. Id. at 261. The court, therefore, dismissed the case for lack of subject matter jurisdiction. Id. at 262.

On appeal, Rick's argues that the Court of Federal Claims erred in dismissing its contract claims, in denying it due process, and in failing to transfer the professional negligence claim to the District Court for the Eastern District of Pennsylvania. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(3).

II

Subject matter jurisdiction is a question of law, which we review de novo. Emery Worldwide Airlines, Inc. v. United States, 264 F.3d 1071, 1078 (Fed.Cir.2001). We review a denial of a request for additional discovery for abuse of discretion. Digeo, Inc. v. Audible, Inc., 505 F.3d 1362, 1370 (Fed.Cir.2007); Forest Prods. N.W., Inc. v. United States, 453 F.3d 1355, 1359 (Fed.Cir.2006). A decision by the Court of Federal Claims concerning whether to dismiss a claim or transfer it to another court is also reviewed for abuse of discretion. LeBlanc v. United States, 50 F.3d 1025, 1031 (Fed.Cir.1995). The underlying determination of whether the transferee court has jurisdiction over the claim is a question of law, which we review de novo. Acceptance Ins. Cos. v. United States, 503 F.3d 1328, 1332 (Fed.Cir.2007).

III

A

Rick's argues that the Court of Federal Claims erred in dismissing its claims for lack of subject matter jurisdiction. The jurisdictional reach of the Court of Federal Claims is set forth in the Tucker Act. The Tucker Act provides:

(1) The United States Court of Federal Claims shall have jurisdiction to render judgment upon any claim against the United States founded either upon the Constitution or any Act of Congress or any regulation of an executive department, or upon any express or implied contract with the United States, or for liquidated or unliquidated damages in cases not sounding in tort....

... The Court of Federal Claims shall have jurisdiction to render judgment upon any claim by or against, or dispute with, a contractor arising under section 10(a)(1) of the Contract Disputes Act of 1978, including a dispute concerning termination of a contract, rights in tangible or intangible property, compliance with cost accounting standards, and other nonmonetary disputes on which a decision of the contracting officer has been issued under section 6 of that Act.

28 U.S.C. § 1491(a) (emphases added). The plain language of the Tucker Act excludes from the Court of Federal Claims jurisdiction claims sounding in tort. Id. § 1491(a)(1). A claim for professional negligence is a tort claim. GlobalNet Financial.Com Inc. v. Frank Crystal & Co., 449 F.3d 377, 385 (2d Cir.2006); GLF Const. Corp. v. LAN/STV, 414 F.3d 553, 555 (5th Cir.2005); Piazza v. Ebsco Indus., Inc., 273 F.3d 1341, 1348 (11th Cir.2001); White v. Napoleon, 897 F.2d 103, 114 n. 4 (3d Cir.1990). Therefore, the Court of Federal Claims did not err in concluding that it lacked subject matter jurisdiction to hear the professional negligence claim of Count III.

B

In Count...