RMI Titanium Co. v. Westinghouse Elec. Corp.

• Decision Date: 22 March 1996
• Docket Number: No. 94-3506,94-3506
• Parties: RMI TITANIUM COMPANY, Plaintiff-Appellant, v. WESTINGHOUSE ELECTRIC CORPORATION, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1125

78 F.3d 1125

34 Fed.R.Serv.3d 1288

RMI TITANIUM COMPANY, Plaintiff-Appellant, v. WESTINGHOUSE ELECTRIC CORPORATION, et al., Defendants-Appellees.

No. 94-3506.

United States Court of Appeals Sixth Circuit.

Argued Oct. 2, 1995.

Decided March 22, 1996.

On Appeal from the United States District Court for the Northern District of Ohio; Thomas D. Lambros, Chief Judge.

Barton A. Bixenstine (argued and briefed), Ulmer & Berne, Cleveland, OH, for RMI Titanium Company.

John W. Beatty, Frances L. Figetakis, Dinsmore & Shohl, Cincinnati, OH, for Westinghouse Electric Corporation, FERMCO, Phillip C. Weddle.

John D. Luken (argued and briefed), John W. Beatty, Dinsmore & Shohl, Cincinnati, OH, for Westinghouse Environmental Management Company of Ohio, William E. Kortier, Louis Bogar.

John D. Luken, Dinsmore & Shohl, Cincinnati, OH, Douglas C. Ross, Davis, Wright &amp Michael Anne Johnson, Asst. U.S. Attorney (argued and briefed), Cleveland, OH, for U.S.

Tremaine, Seattle, WA, for Westinghouse Hanford Company.

Before: SILER and DAUGHTREY, Circuit Judges; ROSEN, District Judge. ^*

ROSEN, District Judge.

Plaintiff/Appellant RMI Titanium Company appeals the decision of the United States District Court for the Northern District of Ohio dismissing RMI's Complaint in its entirety for lack of subject matter jurisdiction. For the reasons stated herein, we affirm.

I. INTRODUCTION

This action arises out of the termination of a government contract to supply uranium extrusions. For 25 years, Plaintiff RMI Titanium Company ("RMI") had directly contracted with the Department of Energy (the "DOE") to produce uranium extrusions at RMI's site in Ashtabula, Ohio. In 1988, however, the DOE interposed Defendant Westinghouse Environmental Management Company ("WEMCO") ¹ as the prime management contractor at RMI's Ashtabula site and, at the DOE's direction, RMI and WEMCO entered into a subcontract ² continuing RMI in the same production role it previously had with the DOE as a direct contractor, but now under the managerial oversight of WEMCO. ³

The RMI/WEMCO subcontract contained a "Disputes" clause which provided that "all disputes arising under or related to this contract" were to be resolved by submitting them to the designated Department of Energy Contracting Officer ("CO"), whose decision would be "final and conclusive and not subject to review by any forum, tribunal or Government agency" except for "an appeal to the DOE Board of Contract Appeals (EBCA)".

Shortly after RMI and WEMCO entered into the subcontract, at the DOE's direction, WEMCO instructed RMI to cease production. In accordance with the Disputes clause, RMI then submitted claims to the Contracting Officer seeking over $125 million in damages for WEMCO's and the DOE's actions. On January 4, 1993, the CO issued his decision finding merit in only one of RMI's claims for which he awarded RMI only $476,837.

Apparently dissatisfied with the Contracting Officer's decision, instead of appealing to the EBCA, four days after the CO issued his decision, on January 8, 1993, RMI instituted this lawsuit, asserting in its Complaint the same allegations it made in its claims to the CO. ⁴ However, RMI never mentioned in its Complaint that it had filed administrative CDA claims with the CO or that the CO had issued a decision.

In response to RMI's Complaint, the Defendants moved to dismiss pursuant to Fed. R. Civ. Pro. 12(b)(1). The Westinghouse Defendants District Judge Thomas Lambros referred Defendants' motions to Magistrate Judge David Perelman for Report and Recommendation. The Magistrate Judge, in two lengthy R & Rs, recommended that both the Westinghouse Defendants' and the Government's motions to dismiss be granted. In a 16-page Memorandum Opinion and Order, Judge Lambros adopted Magistrate Judge Perelman's R & Rs and dismissed RMI's action in its entirety. RMI now appeals.

                moved to dismiss for lack of subject matter jurisdiction arguing that the Contract Disputes Act of 1978, 41 U.S.C. § 601 et seq.  (the "CDA") applied to RMI's claims, and thus preempted district court jurisdiction over this matter.   Alternatively, they argued that even if the CDA did not divest the court of jurisdiction, the Disputes clause in the RMI/WEMCO contract precludes RMI from proceeding with a judicial action.   The United States also moved separately to dismiss for lack of subject matter jurisdiction by virtue of RMI's failure to exhaust administrative remedies under the Federal Tort Claims Act and on sovereign immunity grounds
                

II. FACTUAL BACKGROUND

RMI is a manufacturer of titanium products and a provider of extrusion services. From 1962 through 1988, RMI was under a direct contract with the Department of Energy to provide uranium extrusions which were then sent to the DOE's Fernald, Ohio facility for use in connection with the DOE's nuclear weapons program. RMI used a DOE-owned press and other DOE-owned equipment at RMI's Ashtabula, Ohio site to produce the uranium extrusions. The DOE also permitted RMI to use the government-owned equipment for its own commercial activities which included providing extrusions and other goods for private customers in the automotive, electronic, aerospace and superconductor industries. For this commercial use, RMI paid the DOE a small fee.

THE RMI/WEMCO SUBCONTRACT

In April 1988, at the DOE's request, RMI entered into a subcontract with WEMCO under which RMI continued to provide extrusions to the DOE, only now under the managerial oversight of WEMCO. The subcontract also provided for RMI's continued commercial use of DOE-owned equipment. With respect to such commercial use, the subcontract specifically provided:

It is recognized by the parties hereto that the primary objective of this subcontract is the performance of the subcontract work for WMCO acting on behalf of the DOE. The parties recognize further that the use for commercial purposes of the Government-owned machinery and equipment is a privilege extended by DOE through WMCO to the Subcontractor [RMI]. Accordingly, the unavailability to the Subcontractor of said machinery and equipment for use for commercial purposes for any reason ... shall not constitute a breach of this agreement and no claims for damages or reimbursement of costs of any nature shall be considered under this subcontract....

[Subcontract, C-1, JA p. 208.]

The subcontract also contained explicit provisions for the resolution of disputes "arising under or relating to" the contract. Article A.20 of the General Provisions of the contract provides:

A. WMCO hereby consents to and the Subcontractor [RMI] agrees to the resolution of all disputes arising under or related to this Contract through the disputes procedure provided under WMCO's prime contract with the DOE, as such procedure is modified herein. In the event that a dispute arises relating to this Contract and is not settled by agreement of the parties hereto, [RMI] shall submit its claim to the Contracting Officer.Any such claim shall state as authority for the request that this Contract is being performed pursuant to Prime Contract No. DE-AC05-860R21600 with the DOE.

* * * * * *

E. The decision of the Contracting Officer shall be final and conclusive and not subject to review by any forum, tribunal or Government agency, except that within 90 days from the date [JA p. 133.]

of receipt of the Contracting Officer's decision, an appeal to the DOE Board of Contract Appeals (EBCA) may be commenced by reference to the Prime Contract referred to in paragraph A of this article and prosecuted in accordance with the rules of procedure of the EBCA.

Shortly after the execution of the RMI/WEMCO subcontract, the DOE ceased uranium production at Fernald and, therefore, no longer needed the uranium extrusions produced by RMI. In October 1989, the DOE directed WEMCO to cease purchasing uranium extrusions from RMI. According to RMI, WEMCO nonetheless represented that RMI's status as a DOE extrusion resource would continue until September 30, 1991, the formal expiration date of the subcontract.

Subsequently, in January 1990, WEMCO instructed RMI to terminate all extrusion processing of radioactive materials using the DOE equipment but to continue performing environmental remediation at the site as directed by WEMCO. Three months later, in March 1990, WEMCO directed RMI to immediately initiate the de-licensing of all extrusion operations at the Ashtabula facility, effectively putting to an end not only RMI's DOE production but its other commercial production, as well.

Defendants contend that WEMCO's directives came at the instruction of the DOE, and that RMI was aware of that fact. (In defending the motion to dismiss, however, RMI disputes this contending that WEMCO acted solely on its own and for its own private interests. ⁵ )

As evidence of RMI's understanding that the directives originated from the DOE, WEMCO points to RMI's 1990 and 1991 10-K forms submitted to the SEC which include the following statement:

Through October 1990, the Company's [RMI's] Extrusion Division converted copper, aluminum, titanium and other specialty metal alloys into extrusions for commercial and aerospace markets. It also had a contract to convert depleted uranium for the Department of Energy ("DOE"). DOE, through the prime contractor, notified the Company of a change in the scope of the contract from a production site to a remediation and restoration site. As a result of this contract change, the Company no longer conducts commercial conversion work at the facility. The loss of this commercial business did not have a material adverse affect on consolidated sales or net income in 1991.

[JA p. 352. See also JA p. 346.]

RMI'S ADMINISTRATIVE CDA CLAIMS

After it was ordered to cease extrusion operations, RMI filed three separate claims with the DOE Contracting Officer as provided in the "Disputes" clause in the RMI/WEMCO contract seeking declaratory relief and recovery of damages in excess of...