Sigmon Fuel Co. v. Tennessee Valley Authority, 82-5148
| Decision Date | 25 July 1983 |
| Docket Number | No. 82-5148,82-5148 |
| Parties | 31 Cont.Cas.Fed. (CCH) 71,311 SIGMON FUEL COMPANY, Plaintiff-Appellant, v. TENNESSEE VALLEY AUTHORITY, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Sixth Circuit |
William G. Cockrill (argued), McCord & Cockrill, Knoxville, Tenn., for plaintiff-appellant.
Herbert S. Sanger, Jr., Gen. Counsel, James E. Fox, Associate Gen. Counsel, Robert C. Glinski (argued), Edwin W. Small, Knoxville, Tenn., for defendant-appellee Tennessee Valley Authority.
Before LIVELY and CONTIE, Circuit Judges, and WEICK, Senior Circuit Judge.
Sigmon Fuel Company, an assignee of the proceeds of a coal mining contract between the Tennessee Valley Authority (TVA) and J.L. Thacker, Inc. (Thacker), appeals from the district court's order granting the TVA's motion for summary judgment, 531 F.Supp. 80 (E.D.Tenn.1982), and an order denying Sigmon Fuel's subsequent Fed.R.Civ.P. 59 motion to alter or amend judgment. The sole issue necessary for our determination is whether the TVA was barred by the Assignment of Claims Act of 1940, 31 U.S.C. Sec. 203 and 41 U.S.C. Sec. 15, from recovering amounts previously paid out for reclamation work by a set-off against unpaid invoices for delivered coal. We hold that the recovery of such overpayments is prohibited by the 1940 Act and reverse the district court's judgment.
On June 5, 1978, the TVA entered into a three-year surface-mined coal contract. The contract provided that Thacker must perform reclamation to the TVA's satisfaction. To guarantee the proper performance of the required reclamation, the contract provided that the TVA would withhold prescribed amounts from each invoice and hold these funds in a "Reclamation Account" and a "Contract Performance Escrow Account." The contract further provided that the contractor, Thacker, would be liable for any amounts over and above the two accounts which was necessary for reclamation. Finally, the contract price for the coal included an amount to cover Thacker's reclamation costs.
On July 7, 1978, Thacker assigned its right to proceeds under the contract to Sigmon Fuel pursuant to the Assignment of Claims Act of 1940, 31 U.S.C. Sec. 203 and 41 U.S.C. Sec. 15. The assignment was approved by the TVA. Sigmon Fuel acted as a factor. Thacker would deliver coal to the TVA and present invoices to Sigmon Fuel which would then advance money to Thacker. TVA would subsequently make payment directly to Sigmon Fuel on the invoices.
In early 1980, the TVA became aware of Thacker's failure to do the required reclamation work. In June 1980, the TVA terminated its contract with Thacker due to the lack of reclamation and subsequently contracted with a company to perform the necessary reclamation. All of the funds held in the reclamation and escrow accounts were applied to cover the cost of reclamation. Since these two accounts were insufficient to pay the reclamation contract, the TVA also withheld approximately $175,000 from unpaid invoices on delivered coal which represented the amount that the TVA had previously paid for costs incurred due to reclamation. The unpaid invoices were for coal which had been delivered by Thacker in February and May of 1980 and for which Sigmon Fuel had advanced funds to Thacker. On appeal, Sigmon Fuel does not challenge the TVA's use of the funds in the reclamation and escrow accounts but rather is only contesting the withholding of the $175,000 from unpaid invoices.
Sigmon Fuel advanced several claims in this action but we only address its contention that the TVA was barred by the Assignment of Claims Act of 1940 from recovering amounts previously paid for reclamation by a set-off against unpaid invoices.
The Assignment of Claims Act of 1940 provides in part that:
[N]o liability of any nature of the assignor to the United States ... whether arising from or independently of such contract, shall create or impose any liability on the part of the assignee to make restitution, refund, or repayment ... to the United States of any amount ... received under the assignment.
31 U.S.C. Sec. 203 and 41 U.S.C. Sec. 15. The purpose of the Act, "was to make it easier for government contractors to secure financing for carrying out of obligations to the government to the end that government contracts may be speedily and effectively performed." United States v. Hadden, 192 F.2d 327, 329 (6th Cir.1951).
We agree with the TVA that the Act does not flatly prohibit set-offs. The Act does, however, clearly prohibit the TVA from requiring an assignee such as Sigmon Fuel to repay amounts received under the assignment. Since the TVA may not require Sigmon Fuel to repay funds...
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