Sommers Oil Co. v. US

• Decision Date: 09 March 2001
• Docket Number: DEFENDANT-APPELLEE,PLAINTIFF-APPELLANT,No. 00-5066,00-5066
• Citation: 241 F.3d 1375
• Parties: (Fed. Cir. 2001) SOMMERS OIL COMPANY,, v. UNITED STATES,
• Court: U.S. Court of Appeals — Federal Circuit

Page 1375

241 F.3d 1375 (Fed. Cir. 2001)

SOMMERS OIL COMPANY, PLAINTIFF-APPELLANT, v. UNITED STATES, DEFENDANT-APPELLEE.

No. 00-5066

U.S. Court of Appeals, Federal Circuit

March 09, 2001

Appealed from: United States Court of Federal Claims, Judge Christine O.C. Miller

Timothy M. O'Brien, Oliver Maner & Gray Llp, of Savannah, Georgia, argued for plaintiff-appellant. Of counsel was Patrick T. O'Connor.

Kathleen Z. Quill, Attorney, Commercial Litigation Branch, Civil Division, Department of Justice, of Washington, Dc, argued for defendant-appellee. With her on the brief were David M. Cohen, Director and Harold D. Lester, Jr., Assistant Director.

Before Clevenger, Schall, and Bryson, Circuit Judges.

Bryson, Circuit Judge.

Sommers Oil Company ("Sommers") contends that agents of the United States seized and retained $41,000 in cash that belonged to Sommers. After unsuccessfully attempting to obtain the funds through administrative channels, Sommers filed suit in the United States Court of Federal Claims, arguing that it was entitled to the money on four legal theories, set forth in a four-count complaint. The Court of Federal Claims denied relief. The court dismissed two of the counts of Sommers' complaint for failure to state a claim on which relief could be granted. The court held that it did not have jurisdiction over the other two counts, and it transferred those claims to a United States District Court. Sommers has appealed the court's order with respect to the two counts of the complaint that the court dismissed for failure to state a claim. We reverse and remand for further proceedings.

I.

The complaint alleged the following: Sommers is a Georgia corporation engaged in the wholesale and retail sale of petroleum products. In early 1992, Sommers' president, Jackie M. Sommers, Sr., agreed to cooperate with the Criminal Investigation Division (CID) of the Internal Revenue Service in an investigation of one Michael Vax. The investigation focused on Mr. Vax's alleged sale of gasoline and diesel fuel on which federal and state excise taxes had not been paid. During the investigation, Mr. Sommers revealed to Special Agent Gary Purvis of the CID that Mr. Vax had offered to sell him gasoline at four cents below the market price if Mr. Sommers would pay the cost of the gasoline, plus the required excise taxes, directly to Mr. Vax. Mr. Vax told Mr. Sommers that if at any time he could not supply Mr. Sommers with gasoline on those terms, Mr. Sommers could purchase gasoline from his normal suppliers and Mr. Vax would pay Mr. Sommers five cents per gallon for the purchases he was required to make from those suppliers. According to the complaint, Mr. Sommers advised Agent Purvis of the proposed scheme, and Agent Purvis and his "superiors within the CID agreed that the Sommers Oil Company could retain the reimbursements from Mr. Vax."

Pursuant to their agreement, Mr. Sommers received payments from Mr. Vax on several occasions, allegedly with the knowledge and acquiescence of the CID. In the fall of 1992, Mr. Vax was unable to provide gasoline Sommers needed, and Sommers purchased gasoline from one of its regular suppliers. In accordance with their five cent per gallon rebate agreement, Mr. Vax agreed to pay Sommers $60,000 in connection with those purchases. Mr. Vax paid a portion of that amount to Sommers directly, but when Mr. Vax was prepared to pay the $41,000 balance of that sum, the CID arranged for an IRS agent, posing as an agent for Sommers, to collect the money. When Mr. Sommers asked for the $41,000 from the IRS, the IRS allegedly advised him that it needed to retain the money for use as evidence against Mr. Vax.

When the criminal proceedings against Mr. Vax ended, Mr. Sommers again asked for the $41,000, but the IRS declined to give him the money. After exhausting his administrative remedies, Mr. Sommers filed suit in the Court of Federal Claims, arguing four theories of recovery: (1) that the government had taken his money for a public purpose without just compensation, in violation of the Takings Clause of the Fifth Amendment; (2) that the government had taken his money in violation of the Due Process Clause of the Fifth Amendment; (3) that the government had breached an implied-in-fact contract to deliver the money to Sommers; and (4) that the government should be deemed to be holding the money in a constructive trust for Sommers.

The Court of Federal Claims held that it did not have jurisdiction over the due process and constructive trust counts of the complaint, and it transferred those claims to the United States District Court for the Southern District of Georgia. Those claims are not at issue in this appeal. The court further held that neither of the two remaining counts-claiming a compensable taking and a breach of contract-adequately stated a claim on which relief could be granted, and the court therefore dismissed those portions of the complaint under Rule 12(b)(4) of the Rules of the Court of Federal Claims. This appeal followed.

II.

When reviewing a dismissal for failure to state a claim upon which relief can be granted under Rule 12(b)(4) of the Rules of the United States Court of Federal Claims, which is the equivalent of Rule 12(b)(6) of the Federal Rules of Civil Procedure, we must accept as true all the factual allegations in the complaint, see Leatherman v. Tarrant County Narcotics Intelligence & Coordination Unit, 507 U.S. 163, 164 (1993); Gould, Inc. v. United States, 935 F.2d 1271, 1274 (Fed. Cir. 1991), and we must indulge all reasonable inferences in favor of the non-movant, see Scheuer v. Rhodes, 416 U.S. 232, 236 (1974); Perez v. United States, 156 F.3d 1366, 1370 (Fed. Cir. 1998); Highland Falls-Fort Montgomery Cent. Sch. Distr. v. United States, 48 F.3d 1166, 1169-70 (Fed. Cir. 1995). The question that the court must answer in reviewing a dismissal order in such a case is whether the trial court was correct in concluding that the facts asserted by the plaintiff do not entitle him to a legal remedy. Boyle v. United States, 200 F.3d 1369, 1372 (Fed. Cir. 2000). A trial court should not dismiss a complaint for failure to state a claim unless it is "beyond doubt that the plaintiff can prove no set of facts which would entitle him to relief." Hamlet v. United States, 873 F.2d 1404, 1407 (Fed. Cir. 1989).

A.

In light of the above standards, Sommers' contract claim turns on the adequacy of its pleading. In order to state a claim for breach of an implied-in-fact contract by the United States, a plaintiff must allege a mutual intent to contract including an offer, an acceptance, and consideration. See Trauma Serv. Group v. United States, 104 F.3d 1321, 1325 (Fed. Cir. 1997); City of El Centro v. United States, 922 F.2d 816, 820 (Fed. Cir. 1990). In addition, the plaintiff must allege facts sufficient to show that the government representative who entered into or ratified the alleged contract was authorized to bind the United States to the agreement in question. See Trauma Serv. Group, 104 F.3d at 1325.

The trial court concluded that Sommers' complaint falls short in several respects. None of the grounds invoked by the court, however, is sufficient to support dismissal at this preliminary stage. First, the court held that, as a matter of law, Sommers was not entitled to claim rights in property that was seized as evidence of criminal wrongdoing. To do so, the court held, would interfere with prosecutorial discretion in using the funds as evidence in a criminal case. Although that theory supports the government's claimed right to possession of the property while it is needed as evidence, it does not support the government's contention that Sommers may never have the funds, even after they are no longer needed in any criminal case. If, as Sommers alleges, it has a legal right to the funds as the product of a contractual undertaking by the government to turn those funds over to Sommers, the fact that the government had a temporary need to use the funds as evidence in a criminal case does not defeat Sommers' right to obtain the funds after the government no longer needs them. See, e.g., United States v. Bein, 213 F.3d 408, 411 (3d Cir. 2000) ("It is well settled that the Government may seize evidence for use in investigation and trial, but that it must return the property once the criminal proceedings have concluded, unless it is contraband or subject to forfeiture."); United States v. La Fatch, 565 F.2d 81, 83 (6th Cir. 1977) ("The general rule is that seized property, other than contraband, should be returned to its rightful owner once the criminal proceedings have terminated.").

The trial court's second ground for decision was that the government's alleged promise to permit Sommers to retain the $41,000 that the IRS obtained from Mr. Vax was not supported by consideration. While the complaint did not plead consideration in so many words, a reasonable inference from the facts alleged in the complaint is sufficient to establish an allegation of consideration. Indeed, the trial court construed the complaint to allege that the IRS agreed that Mr. Sommers "could retain the reimbursements from Mr. Vax if he agreed to cooperate with its investigation." Moreover, the complaint supports the inference that Mr. Sommers permitted an IRS agent to pick up the $41,000 in cash from Mr. Vax, representing himself to be an agent for Sommers, in exchange for the IRS's agreement that the money would be turned over to Sommers and not...