Sharman Co., Inc. v. U.S.
| Decision Date | 17 August 1993 |
| Citation | 2 F.3d 1564 |
| Parties | 39 Cont.Cas.Fed. (CCH) 76,567 The SHARMAN COMPANY, INC., Plaintiff-Appellant, v. The UNITED STATES, Defendant-Appellee. 92-5150. |
| Court | U.S. Court of Appeals — Federal Circuit |
Robert E. Steinberg, Porter, Wright, Morris and Arthur, Washington, DC, argued, for plaintiff-appellant. With him on the brief was Matthew S. Bergman.
Shalom Brilliant, Atty., Commercial Litigation Branch, Dept. of Justice, Washington, DC, argued, for defendant-appellee. With him on the brief, were Stuart M. Gerson, Asst. Atty. Gen., David M. Cohen, Director, and Thomas W. Petersen, Asst. Director. Also on the brief was Lt. Col. Kevin Sandkuhler, U.S. Marine Corps, of counsel.
Before RICH, MICHEL, and SCHALL, Circuit Judges.
The Sharman Company ("Sharman" or "the contractor") appeals from the judgment of the United States Claims Court, 1 awarding the government $1,391,240 under the Contract Disputes Act of 1978 (CDA), 41 U.S.C. Sec. 601 et seq., following the contractor's repudiation of this contract to make steel water tanks for the Marine Corps. The Sharman Company v. United States, No. 90-108C (Cl.Ct. June 12, 1992). The Claims Court held that the government was entitled to return of $1,391,240 in unliquidated progress payments because prior steel price increases, not the government's delays, caused the contractor's decision not to perform.
Sharman filed suit on February 2, 1990, placing the progress payments claim in litigation. Per CDA section 605, a final decision of a contracting officer on a claim is a jurisdictional prerequisite to litigation. Because the contracting officer had not issued a final decision as to either the government counterclaim, or the contractor's mirror image claim regarding the progress payments, both derivative of the original contractor costs claim, before Sharman filed suit, the Claims Court lacked jurisdiction over both claims and should have dismissed them.
The Claims Court, however, dismissed the contractor's claim for its costs asserted in the original complaint of February 2, 1990 as arising from a termination for the convenience of the government, because that claim had not been presented to the contracting officer. Therefore, the jurisdictional prerequisite was held not met as to this claim. 2
Additionally, the Claims Court dismissed Sharman's challenge in its original complaint to the default termination as a declaratory judgment complaint beyond its jurisdiction. Since the 1992 amendments to the CDA grant the Claims Court jurisdiction over contractor challenges to default terminations in all non-final cases, the Claims Court now has subject matter jurisdiction over this matter.
Accordingly, we: (1) reverse the money judgment in favor of the government, for lack of jurisdiction; and (2) remand with instructions to address the contractor's independent challenge to the default termination, which is no longer beyond the Claims Court's jurisdiction and in light of our holding requires decision.
Sharman contracted with the United States Marine Corps ("the government") for the manufacture of steel water tanks. Due to escalation in steel prices during the term of contract performance, Sharman repudiated the contract. Because Sharman did not complete production of the tanks as required, the government terminated the entire contract 3 for default through a notice and final decision of termination issued by the contracting officer on August 7, 1989.
On September 12, 1989, the government sent a letter to the contractor seeking repayment Sharman, however, did not dispute the amount to the contracting officer but instead filed suit in the Claims Court on February 2, 1990. In its complaint, "Sharman sought invalidation of the default termination, conversion of the termination to one for Government convenience and recovery of all uncompensated costs incurred in the contract's performance." Sharman Co. v. United States, 24 Cl.Ct. 763, 765 (1991) (). The complaint also included a count in quantum meruit asserting entitlement to all the government's progress payments, which Sharman characterized as "payment for the work performed" on the contract, plus additional monies. 4
of progress payments in the amount of $2,066,696.36. The letter was characterized as a "notice of demand for payment of contract debt," and also notified Sharman that if it disputed the amount sought, it could submit a proposal for deferment of collection.
The government filed its answer to Sharman's complaint on May 3, 1990, denying Sharman's entitlement to relief as well as its characterization of the government's progress payments as earned.
On June 12, 1990, the government moved to dismiss the complaint for lack of subject matter jurisdiction on the grounds that the complaint did not present a "claim," i.e., an assertion of entitlement to a sum certain presently due and owing, but rather, was essentially a request for declaratory relief concerning the lawfulness of the default termination. Alternatively, the government argued that even if Sharman's complaint were read as including a demand for relief from the debt first noticed in the contracting officer's letter of September 12, 1989, the court lacked jurisdiction because on its face that letter plainly was not a final decision, which did not issue until after suit was initiated.
On October 18, 1990, before the Claims Court ruled on the government's motion to dismiss, the contracting officer sent the contractor another letter regarding return of the progress payments. This letter stated that it was a "notice of the Contracting Officer's final decision," and identified the amount owed in unliquidated progress payments as $1,391,240.29. It was the first statement by the government of a "claim," i.e., the assertion as a matter of right to a sum certain as presently due and owing, on which there was a final decision by the contracting officer.
On December 20, 1991, the Claims Court granted in part and denied in part the government's motion to dismiss. The court dismissed Sharman's claim for convenience termination costs on the grounds that the claim had not been quantified and had never been submitted to the contracting officer. Sharman, 24 Cl.Ct. at 766. The court also stated that, in view of Overall Roofing & Construction, Inc. v. United States, 929 F.2d 687, 689 (Fed.Cir.1991), the contracting officer's decision on the default termination was, of itself, insufficient to confer jurisdiction with respect to Sharman's challenge. However, the court held that it nevertheless had jurisdiction to entertain Sharman's challenge to the default termination decision as an issue relating to the money claim but not as an independent claim, i.e., a separate cause of action. It viewed the contracting officer's letter of September 12, 1989, concerning return of excess progress payments as a "timely assertion of a repayment demand," 24 Cl.Ct. at 767, which had the effect of quantifying the government's claim inherent in the earlier default termination decision. Accordingly, the Claims Court viewed Sharman's challenge to the termination for default as being properly before it "as a contractor's suit on a quantified Government claim." Id. at 768. The court did not explain how this September 1989 notice and demand constituted a "claim" under the CDA and its implementing regulation. Nor did it explain how the September letter met the requirement for a final decision.
In response to the court's partial dismissal, Sharman amended its complaint on January 6, 1992 to include a specific challenge to the On June 11, 1992, the Claims Court ruled from the bench on the merits of the government claim. The Claims Court found that "[i]nasmuch as the escalation in steel prices had begun well before [the date from which the government was responsible for the delay], the Government's delay cannot be considered the source of the contractor's injuries." Accordingly, the Claims Court entered judgment in the amount of $1,391,240 on the government's counterclaim and in light of its ruling in December 1991, dismissed the remainder of the contractor's complaint, inter alia, challenging the default termination. Sharman appealed to this court. We have jurisdiction pursuant to 28 U.S.C. Sec. 1295(a)(3) (1988).
government's right to payment of the amount representing unliquidated progress payments. The government counterclaimed for the unliquidated progress payments in the amount of $1,391,240. The government also requested that the Claims Court certify the jurisdictional issue for an interlocutory appeal pursuant to 28 U.S.C. Sec. 1292(b) (1988), but the request was denied.
In an appeal of a CDA case, we review de novo for errors of law. See Cooper v. United States, 827 F.2d 762, 763 (Fed.Cir.1987) (citing Milmark Servs., Inc. v. United States, 731 F.2d 855, 857 (Fed.Cir.1984)). A determination of whether the Claims Court had jurisdiction in such a case is a question of law. Transamerica Ins. Corp. v. United States, 973 F.2d 1572, 1576 (Fed.Cir.1992). Therefore, no deference is due to the Claims Court decision on the dispositive issue here.
On appeal, both parties argue that the Claims Court lacked jurisdiction over the contractor's claim and the government counterclaim for return of progress payments. Therefore, before we may review the merits we must first address whether the Claims Court had jurisdiction over any of the claims in suit.
On appeal, the government argues, as it did in its motion to dismiss, that "because the Government's claim for the return of unliquidated progress payments was not the subject of a final contracting officer's decision prior to the commencement of this suit, the Claims Court lacked jurisdiction to entertain the suit." The...
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