A & S Council Oil Co., Inc. v. Lader

• Decision Date: 09 June 1995
• Docket Number: No. 93-5345,93-5345
• Citation: 312 U.S.App. D.C. 270,56 F.3d 234
• Parties: , 40 Cont.Cas.Fed. (CCH) P 76,793 A & S COUNCIL OIL COMPANY, INC., et al., Appellees, v. Philip LADER, in his official capacity as Administrator of the United States Small Business Administration, Appellant.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 234

56 F.3d 234

312 U.S.App.D.C. 270, 40 Cont.Cas.Fed. (CCH) P 76,793

A & S COUNCIL OIL COMPANY, INC., et al., Appellees, v. Philip LADER, in his official capacity as Administrator of

the United States Small Business Administration, Appellant.

No. 93-5345.

United States Court of Appeals, District of Columbia Circuit.

Argued Feb. 16, 1995.

Decided June 9, 1995.

Appeal from the United States District Court for the District of Columbia (87cv01969).

Daniel F. Van Horn, Asst. U.S. Atty., Washington, DC, argued the cause for appellant. With him on the briefs were Eric H. Holder, Jr., U.S. Atty., R. Craig Lawrence and John D. Bates, Asst. U.S. Attys., Washington, DC.

Julius E. Mensah, Indianapolis, IN, argued the cause and filed the brief for appellees.

Before: BUCKLEY, WILLIAMS and SENTELLE, Circuit Judges.

STEPHEN F. WILLIAMS, Circuit Judge:

In the early 1980s the Small Business Administration subcontracted with three minority-owned small businesses to perform federal procurement contracts under its Sec. 8(a) program. The companies lost money--or at any rate failed to make the profits they anticipated. They sued the SBA's Administrator, alleging that the SBA acted arbitrarily and capriciously and in excess of its statutory authority because the contract prices failed to guarantee them a "reasonable profit". The district court found that the SBA was "unjustly enriched" by its enforcement of the contracts, and that "[t]his unjust enrichment amounts to a taking of private property without just compensation in violation of the fifth amendment to the Constitution of the United States." A & S Council Oil Co., Inc. v. Saiki, 799 F.Supp. 1221, 1235, 1238-39 (D.D.C.1992) ("A & S Council "). On that basis, the court awarded plaintiffs money damages of $3.3 million, plus interest from the time of the alleged taking. A & S Council Oil Co., Inc. v. Bowles, Civ. No. 87-1969-OG, order at 1-2 (D.D.C. Sept. 28, 1993).

We find that plaintiffs' claims cannot properly be characterized as "takings" claims. Furthermore, though at times plaintiffs cloak the claims in language evocative of the Administrative Procedure Act, 5 U.S.C. Sec. 702 (1988), they are in fact contract claims covered by the Contract Disputes Act ("CDA"), 41 U.S.C. Secs. 601-613 (1988 & Supp. V 1993). The CDA provides the exclusive avenue for relief for all such contract claims against the United States. But because the plaintiffs failed to exhaust their administrative remedies under the CDA, no judicial review is available to them. We therefore reverse and remand to the district court with instructions to dismiss the case.

* * *

Under its Sec. 8(a) program, the Small Business Administration enters supply contracts with federal government procurement agencies and then arranges to perform those contracts by subcontracting with "socially and economically disadvantaged small business concerns". 15 U.S.C. Sec. 637(a) (Supp. V 1993). A & S Council Oil Company, Williams Fuel Oil Service, and L.H. Smith Oil Corporation qualified to participate in the program and entered into one or more subcontracts with the SBA to supply petroleum products to military bases and other government installations from 1981 to 1985. In 1987 they filed this suit, alleging that they had been unable to make a profit on the subcontracts because of the method used to determine the contract prices.

That method was established in a December 5, 1979 "Interagency Agreement" between the SBA and the Defense Logistics Agency, a division of which, the Defense Fuel Supply Center, purchases petroleum products for use by the military and other federal agencies. This Agreement governed all procurements of petroleum products by the DFSC from Sec. 8(a) companies from its execution through 1985; it thus covered all the subcontracts relevant to this case. Under its terms, Sec. 8(a) subcontracts to supply petroleum products were to be at a "fair market price", which the Agreement defined as the "highest award price for the competitively solicited items (by type of product and method of delivery)" for a particular commercial market area. Thus, where multiple contracts had been competitively awarded for the same product in the same area, the Sec. 8(a) companies would receive a price equal to the highest of the awarded prices. If only one similar contract had been awarded in a given area, that contract set the "fair market price". The SBA used the formula to calculate the price at which it offered each of the subcontracts in question to plaintiffs. On learning the "fair market price", of course, plaintiffs could have declined to contract; in no case were Sec. 8(a) companies compelled to enter contracts.

In their original complaint, plaintiffs based their claims of district-court jurisdiction and waiver of sovereign immunity on the SBA's "sue and be sued" clause, 15 U.S.C. Sec. 634(b)(1); the grant of federal question jurisdiction, 28 U.S.C. Sec. 1331; the Administrative Procedure Act, 5 U.S.C. Sec. 702; and the Tucker Act, 28 U.S.C. Sec. 1346(a)(2), as well as other statutes no longer relevant. They sought money damages of $15 million and declaratory relief on the basis of six counts, the first four of which the plaintiffs abandoned in district court. See A & S Council, 799 F.Supp. at 1226. Count V recited SBA regulations implementing Sec. 8(a), as well as SBA Standard Operating Procedures, which stated that SBA policy was to enter into subcontracts that would allow companies to earn a "reasonable profit". It asserted that the SBA's conduct in negotiating and implementing the Interagency Agreement "was contrary to SBA rules and policies [and] arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." Count VI claimed that the Small Business Act did not authorize the Administrator "to enter into agreements fixing prices to be paid by federal procuring agencies to subcontractors under the 8(a) program", a claim that (at least by the time of this appeal) appears to rest on 15 U.S.C. Sec. 637(a)(3), which provides that a small business selected to perform a procurement contract under this program "shall, when practicable, participate in any negotiation of the terms and conditions of such contract." Thus, the theory runs, the SBA exceeded its statutory authority and its own regulatory constraints by negotiating and implementing the Interagency Agreement.

The district court initially understood plaintiffs to be making contract claims. Finding that under the Tucker Act and the Contract Disputes Act the district court lacked jurisdiction over claims in excess of $10,000 arising out of contracts with the government, the court transferred the case to the United States Claims Court. ¹ A & S Council Oil Co., Inc. v. Abdnor, Civ. No. 87-1969-OG, Mem. op. at 13-15, 1988 WL 23258 (D.D.C. March 2, 1988).

Once transferred, plaintiffs encountered another problem. The Claims Court held that, to the extent that the plaintiffs' claims were grounded on the CDA, it too lacked jurisdiction, because plaintiffs had failed to satisfy jurisdictional exhaustion requirements. A & S Council Oil Co., Inc. v. United States, 16 Cl.Ct. 743, 748 (1989). Two of the plaintiff companies, Williams and Smith, had never submitted their claims to a contracting officer. The third, A & S Council, had submitted a claim and lost, but then had failed to perfect a timely appeal to either the Armed Services Board of Contract Appeals or the Claims Court. Id. at 746. ² In considering whether to retransfer the case to the district court, however, the Claims Court found that none of the claims involved "damages stemming from contract performance or non-performance". Rather, it viewed plaintiffs as seeking "damages for alleged illegal conduct occurring in and around October 1979 when the Interagency Agreement was executed, which injuries were subsequently quantified after entering into the contracts." Id. at 748. It therefore transferred the case back to the district court under 28 U.S.C. Sec. 1631 (1988).

Once back in the district court, the parties filed cross-motions for summary judgment, and plaintiffs abandoned the Tucker Act as a basis for jurisdiction, saying that they "have not characterized their complaint as sounding ... in contract." See Plaintiffs' Reply Memorandum in Support of Motion for Summary Judgment, at 2. The district court then granted summary judgment for plaintiffs on Counts V and VI. It found statutory violations by the SBA and, without further explanation, characterized plaintiffs' resulting losses as an unconstitutional taking of their property. A & S Council, 799 F.Supp. at 1238-39. On March 26, 1993, after further briefing, the court issued an opinion defining the scope of plaintiffs' recovery--"the profit margins they should have earned on their subcontracts"" --and referred the calculation of damages to mediation. A & S Council Oil Co., Inc. v. Saiki, Civ. No. 87-1969-OG, Mem. op. at 4, 1993 WL 787241 (D.D.C. Mar. 26, 1993). As a result of the mediation, the parties fixed the amount to which plaintiffs would be entitled under the finding of liability; both parties reserved the right to appeal various issues. On September 18, 1993, the district court entered its final order and judgment in accordance with the parties' partial settlement. A & S Council Oil Co., Inc. v. Bowles, Civ. No. 87-1969-OG, Mem. op. (Sept. 18, 1993). The SBA filed a notice of appeal on November 3, 1993.

* * *

As a threshold matter, plaintiffs contend that we lack jurisdiction because the SBA failed to appeal within 60 days of the district court's March 1993 order defining the scope of recovery and referring the quantification issues to mediation. See 28 U.S.C. Sec. 2107(b) (specifying 60 days as time limit for filing appeal in action in which the United States is a party); Fed.R.App.P. 4(a)(1) (same). They assert that that order left undone only a "mechanical and uncontroversial" determination of damages and was...