Seaboard Lumber Co. v. U.S., 88-1486

• Decision Date: 17 May 1990
• Docket Number: No. 88-1486,88-1486
• Parties: , 36 Cont.Cas.Fed. (CCH) 75,900 SEABOARD LUMBER COMPANY, W.T. Burgess Logging Co., Inc., Big Flat Timber Company, Manke Lumber Company, Merrill & Ring, Inc., Tomco, Inc., Alpine Veneers, Inc., Penn Timber, Inc., Times Mirror Land & Timber Company, Taylor Westbrook, Brazier Forest Products, Inc., Gateway Lumber Company, Mt. Adams Veneer Co. and Capital Development Company, Plaintiffs-Appellants, v. The UNITED STATES, Defendant-Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

Page 1560

903 F.2d 1560

58 USLW 2748, 36 Cont.Cas.Fed. (CCH) 75,900

SEABOARD LUMBER COMPANY, W.T. Burgess Logging Co., Inc., Big Flat Timber Company, Manke Lumber Company, Merrill & Ring Inc., Tomco, Inc., Alpine Veneers, Inc., Penn Timber, Inc. Times Mirror Land & Timber Company, Taylor Westbrook Brazier Forest Products, Inc., Gateway Lumber Company, Mt Adams Veneer Co. and Capital Development Company, Plaintiffs-Appellants, v. The UNITED STATES, Defendant-Appellee.

No. 88-1486.

United States Court of Appeals, Federal Circuit.

May 17, 1990.

Rehearing Denied Sept. 11, 1990.

William F. Lenihan, Schwabe, Williamson, Wyatt & Lenihan, Seattle, Wash., for plaintiffs-appellants. With him on the brief was Mildred J. Carmack, Schwabe, Williamson, Wyatt & Lenihan, Portland, Or. Also on the brief were Jan D. Sokol, Stafford, Frey, Cooper & Stewart, Portland, Or., Richard A. Smith, Harland & Gromala, Eureka, Cal., Wesley R. Higbie, Hendrickson, Higbie & Cole, San Francisco, Cal., and John P. Bledsoe, Spears, Lubersky, Campbell, Bledsoe, Anderson & Young, Portland, Or.

Paul D. Langer, Attorney, Commercial Litigation Branch, Department of Justice, Washington, D.C., for defendant-appellee. With him on the brief were John R. Bolton, Asst. Atty. Gen., David M. Cohen, Director and John W. Showalter, Asst. Director. Also on the brief was William P. McGinnies, Attorney, Office of Gen. Counsel, Dept. of Agriculture, Washington, D.C., of counsel.

Before NIES and BISSELL ^*, Circuit Judges, and BALDWIN, Senior Circuit Judge.

NIES, Circuit Judge.

This appeal is from a certified interlocutory order of the United States Claims Court denying appellants' motion to dismiss the government's counterclaims for breach by the contractors of particular government contracts. Our jurisdiction rests on 28 U.S.C. Sec. 1292(d)(2) (1988). Appellants urged dismissal of the government's counterclaims on the grounds that the appellants have a right to defend against the government's claims in an Article III court. Appellants also assert a right to a jury trial. The Claims Court rejected these constitutional arguments. See Seaboard Lumber Co. v. United States, 15 Cl.Ct. 366 (1988) (Smith, C.J.). We affirm on narrower grounds.

BACKGROUND

Appellants are timber companies that individually contracted with the United States to purchase timber from National Forests. With respect to each contract, the government asserted its breach claim against the contractor by means of an appropriate contracting officer's decision. In each case, the contracting officer issued a decision that the contractor failed to cut, remove and pay for timber as required by the contract and assessed a specific dollar amount of damages in each instance. See 41 U.S.C. Sec. 605(a) (1982).

Each timber purchasing contract, as originally executed or later amended, ¹ contained a standard disputes clause which provides in pertinent part:

C9.2 (disputes).

(a) This contract is subject to the Contract Disputes Act of 1978 (Pub.L. 95-563).

(b) Except as provided in the Act, all disputes arising under or relating to this contract shall be resolved in accordance with this provision.

....

(c)iii .... A claim by the government against the contractor shall be subject to a decision by the contracting officer.

....

(f) The contracting officer's decision shall be final unless the contractor appeals or files a suit as provided in the Act.

By the Contract Disputes Act, 41 U.S.C. Secs. 601-613 (1982 & Supp. V 1987), Congress mandated that these provisions be included in government contracts generally. See 41 U.S.C. Sec. 602 (1982).

Under the above clause, once the decision of the contracting officer becomes final on a government claim against the contractor, the merits of that decision cannot be judicially challenged. To prevent that preclusive effect, the contractor has two options under the contract provisions which incorporate the CDA. The contractor may either appeal within 90 days to the appropriate Board of Contract Appeals as provided in 41 U.S.C. Sec. 606 (1982) or within twelve months file a direct access suit in the United States Claims Court, an Article I court, under 41 U.S.C. Sec. 609(a)(3) (1982). In these proceedings, the facts, as well as the law, are decided de novo by the board or the court. See id.; 41 U.S.C. Sec. 605(a); Assurance Co. v. United States, 813 F.2d 1202, 1206 (Fed.Cir.1987). At the time the CDA became effective, and at the time all but four of the contracts at issue were executed, a direct access suit would have been filed in the United States Court of Claims, an Article III court. ² That was changed, effective October 1, 1982, by the Federal Courts Improvement Act of 1982 (FCIA), Pub.L. No. 97-164, 96 Stat. 25, which placed jurisdiction over direct access suits in a new Article I court, the United States Claims Court. FCIA also provided that an appeal from either the appropriate Board of Contract Appeals or from the United States Claims Court may only be taken to the United States Court of Appeals for the Federal Circuit, an Article III court. The jurisdiction over such appeals is exclusive. 28 U.S.C. Secs. 1295(a)(3), (10) (1988).

Each appellant filed suit in the Claims Court seeking review of the contracting officer's decision in favor of the government as provided in 41 U.S.C. Sec. 609(a). ³ Had they failed to seek review, the contracting officer's decisions under the contracts (and CDA) would have become final and could not thereafter be judicially challenged on the merits. ⁴ In each suit, the government filed a counterclaim asserting the breach of contract claim which was the subject of the contracting officer's decision. Thus, the government's breach of contract claim underlies both the complaint and the counterclaim. Each appellant then filed a motion to dismiss the government's counterclaim urging that adjudication of the counterclaim must occur in an Article III court and that, under the Seventh Amendment, the contractor was entitled to a jury trial. ⁵

Appellants' suits were consolidated in the Claims Court for consideration of the constitutional issues. In denying the appellants' motion to dismiss the government's

                counterclaims, the Claims Court held that:  (1) a government contract claim was not an action at common law and therefore did not require resolution by an Article III court, Seaboard, 15 Cl.Ct. at 369-72;  (2) such claim fell within the "public rights" exception to Article III and Congress could thus constitutionally provide for adjudication by a non-Article III tribunal, id., at 372-74;  and (3) the Seventh Amendment did not entitle the contractors to a jury trial of the government's claims, id. at 374-75.    The Claims Court dealt summarily with the government's alternative defense that the contractors had waived the asserted rights, if any existed.  Recognizing that controlling questions of law were at issue, the questions of appellants' right to trial in an Article III court and right to jury trial, the Claims Court certified the interlocutory order for immediate appeal pursuant to 28 U.S.C. Sec. 1292(d)(2).  This court granted appellants permission to appeal.
                

ISSUE

Whether the CDA, as originally enacted or as amended by FCIA, unconstitutionally deprives appellants of either a right to an Article III court or a jury trial on the government counterclaims for breach of contract?

OPINION

The Seventh Amendment provides:

In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury shall be otherwise reexamined in any Court of the United States, than according to the rules of the common law.

Seaboard and all other contractors (hereinafter Seaboard) assert that the government's breach of contract claim should be deemed comparable to a private contract claim which, historically must be litigated in an Article III court with a right to a jury. In support of this analogy, it asserts that prior to the CDA, the government had to litigate a breach claim against a contractor in an Article III court (although it cites no authority for this proposition). It maintains further that waiver of sovereign immunity and the authority of an Article I court to adjudicate claims against the government are not involved here. These premises lead Seaboard to its ultimate conclusion that the CDA's review procedures are unconstitutional. We disagree. The premises of Seaboard's syllogism are fatally flawed in a number of respects.

I

Seaboard correctly states that the Seventh Amendment preserves a right to a jury trial on issues of fact in suits for breach of contract damages between private party litigants, see Northern Pipeline Constr. Co. v. Marathon Pipe Line, 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982), but Seaboard fails to carry its analogy through to its logical conclusion. The Supreme Court has long recognized that a private litigant may waive its right to a jury and to an Article III court in civil cases. Waiver can be either express or implied. Commodity Futures Trade Comm. v. Schor, 478 U.S. 833, 848, 106 S.Ct. 3245, 3255, 92 L.Ed.2d 675 (1986); cf. D.H. Overmyer Co. v. Frick Co., 405 U.S. 174, 92 S.Ct. 775, 31 L.Ed.2d 124 (1972) (contractual waiver of due process rights). Waiver requires only that the party waiving such right do so "voluntarily" and "knowingly" based on the facts of the case. Brookhart v. Janis, 384 U.S. 1, 4, 5, 86 S.Ct. 1245, 1246, 1247, 16 L.Ed.2d 314 (1966); cf. D.H. Overmyer, 405 U.S. at 185-86, 92 S.Ct. at 782. The acceptance of contract provisions providing for dispute resolution in a forum where there is no entitlement to a jury trial may satisfy the "voluntary" and "knowing" standard. See, e.g., Northwest Airlines, Inc. v. Air Line Pilots Ass'n Int'l, 373 F.2d 136, 142 (8th Cir.) cert. denied, 389 U.S. 827, 88 S.Ct. 77, 19 L.Ed.2d 83 (1967); Maryland Casualty Co. v. United States, 135 Ct.Cl. 428, 438, 141 F.Supp. 900...