U.S. v. General Dynamics Corp.

• Decision Date: 23 September 1987
• Docket Number: No. 86-5292,86-5292
• Citation: 828 F.2d 1356
• Parties: 34 Cont.Cas.Fed. (CCH) 75,252, 34 Cont.Cas.Fed. (CCH) 75,364 UNITED STATES of America, Plaintiff-Appellant, v. GENERAL DYNAMICS CORPORATION, James M. Beggs, Ralph E. Hawes, Jr., David L. McPherson and James C. Hansen, Jr., Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1356

828 F.2d 1356

34 Cont.Cas.Fed. (CCH) 75,252,

34 Cont.Cas.Fed. (CCH) 75,364

UNITED STATES of America, Plaintiff-Appellant, v. GENERAL DYNAMICS CORPORATION, James M. Beggs, Ralph E.

Hawes, Jr., David L. McPherson and James C.

Hansen, Jr., Defendants-Appellees.

No. 86-5292.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Feb. 10, 1987.

Decided April 2, 1987.

Amended Sept. 23, 1987.

Dissent filed April 29, 1987.

Amended Sept. 23, 1987.

Samuel Rosenthal, Washington, D.C., for plaintiff-appellant.

James J. Gallagher, Max L. Gillam, Thomas E. Holliday and Douglas Dalton, Los Angeles, Cal., for defendants-appellees.

Appeal from the United States District Court for the Central District of California.

Before FLETCHER, WIGGINS and BRUNETTI, Circuit Judges.

ORDER

The Amended Opinion, amending Opinion filed April 2, 1987, and Amended Dissent, amending Dissent filed April 29, 1987, submitted with this order, are ordered filed.

AMENDED OPINION ^*

The United States appeals from a district court order staying a criminal action involving allegations of conspiracy and fraud, 18 U.S.C. Secs. 371, 1001, against General Dynamics Corporation and several of that corporation's officers. The stay was entered pending the district court's referral to the Armed Services Board of Contract Appeals (ASBCA or Board) of questions relating to the interpretation of the contract upon which the criminal charges hinge. The government contends that, because the primary jurisdiction doctrine is not applicable, the district court exceeded its jurisdiction in making the referral and in halting criminal proceedings pending agency action. We agree.

BACKGROUND

In 1978, General Dynamics was awarded an Army contract to develop two prototypes of the Division Air Defense (DIVAD) gun system. In 1985, General Dynamics and several General Dynamics officers (General Dynamics) were indicted on charges of conspiring to make and of making false and fraudulent cost statements to the Department of Defense. In essence, the indictment alleged that General Dynamics illegally attempted to offset losses on the DIVAD project by allocating DIVAD costs to Bid and Proposal (B & P) and Independent Research and Development (IR & D) accounts. In defense, General Dynamics contends that the DIVAD contract, which was stated to be a "firm fixed-price (best efforts) contract," either permitted the charges to the B & P and IR & D accounts or was ambiguous as to the propriety of such charges. If either were the case, it is claimed, General Dynamics would not be guilty of criminal wrongdoing.

On January 14, 1986, General Dynamics filed a notice of appeal from the indictment with the ASBCA. Citing two grounds, the ASBCA dismissed the appeal for lack of jurisdiction. General Dynamics, Pomona Division, ASBCA No. 32297, 86-2 B.C.A. (CCH) p 18,903. First the Board determined that the filing of an indictment did not meet the statutory prerequisite to an appeal--the existence of a final decision from a contracting officer. Id. at 95,348; see 41 U.S.C. Sec. 605(a). ¹ Second, the Board found its jurisdiction precluded by the action pending in the district court because the fraud allegations, over which the court had exclusive jurisdiction, were inseparable from the issues General Dynamics was attempting to submit to the Board. General Dynamics, 86-2 B.C.A. at 95,348-49.

Despite the ASBCA's refusal to entertain General Dynamics' appeal, the district court, on September 15, 1986, entered an order in which it invoked the doctrine of primary jurisdiction to stay the litigation and refer issues of contract interpretation to the Board. The court's reasoning and the questions referred are set out in a written opinion issued October 1, 1986. United States v. General Dynamics Corp., 644 F.Supp. 1497 (C.D.Cal.1986) (amended October 28, 1986). The district court found that

[t]his case touches upon important issues in the area of defense procurement. Those issues involve nice questions about the proper construction of contracts and Id. at 1507. The government timely noticed its appeal from the stay and referral. General Dynamics moved to dismiss the appeal for lack of a final, appealable order. The government then filed a protective petition for a writ of mandamus.

regulations. Those questions, in turn, call for expert consideration and uniform answers. Since the ASBCA is uniquely qualified to supply the needed answers, certain issues will be referred to it. ²

Following the commencement of proceedings in this court, the ASBCA, on February 3, 1987, dismissed General Dynamics' appeal that had been based on the district court's referral. ASBCA No. 33633. Again the Board determined that it had no jurisdiction over issues relating to the DIVAD contract because "there was neither a contracting officer's decision nor a claim submitted to the contracting officer under the DIVAD contract regarding the alleged 'mischarging' of costs." Id. at 5. The district court's order was held to be without jurisdictional significance: "The 'referral' by the district court does not constitute such a decision any more than the Grand Jury indictment which the Board considered in the prior appeal." Id. at 6.

The Board noted that related proceedings, ASBCA No. 34051, were pending before it. No. 34051 is based on claims submitted by General Dynamics in February 1986 to a contracting officer involving the B & P and IR & D accounts to which General Dynamics had shifted DIVAD costs. The contracting officer, in a letter dated April 16, 1986, stated that he would not issue a final decision on these claims until the fraud allegations pending before the district court were resolved. General Dynamics docketed an appeal from the contracting officer's refusal to issue a final decision on December 11, 1986. ³ The In response to the Board's February 3 decision, the district court, on February 5, 1987, issued a scheduling order continuing the stay pending action by this court or by the Board in ASBCA No. 34051.

Board found that because the claims made in No. 34051 did not arise under the DIVAD contract, they could not serve to create jurisdiction in No. 33633, the appeal then before it.

DISCUSSION

I.

As a threshold matter, we must determine whether this court has jurisdiction to pass on the propriety of the district court's stay and referral. The government contends that appellate jurisdiction lies under 28 U.S.C. Sec. 1291 and alternatively asserts that it is entitled to a writ of mandamus under the All Writs Act, 28 U.S.C. Sec. 1651.

Ordinarily, a stay is not considered a final decision for purposes of section 1291. Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 10 n. 11, 103 S.Ct. 927, 934, 74 L.Ed.2d 765 (1983); Silberkleit v. Kantrowitz, 713 F.2d 433, 434 (9th Cir.1983). However, "the general rule is inapplicable in situations ... where the impact of the stay is such that the plaintiff is 'effectively out of court.' " Id. (quoting Moses H. Cone Memorial Hosp., 460 U.S. at 9, 103 S.Ct. at 933 (quoting Idlewild Bon Voyage Liquor Corp. v. Epstein, 370 U.S. 713, 715 n. 1, 82 S.Ct. 1294, 1296, 8 L.Ed.2d 794 (1962))).

Although we were initially skeptical that the district court's order was appealable at this time, upon further study and reflection upon the rather convoluted course that this litigation could take if it is stayed until the ASBCA acts on General Dynamics's appeal, we conclude that it is entirely possible that the Government could lose the opportunity to have the merits of its case decided by a court having jurisdiction over the criminal matters alleged in the indictment. In short, this stay could effectively put the government out of court.

Only the Court of Appeals for the Federal Circuit may review any decision that the ASBCA might enter. The Contracts Disputes Act (CDA or Act), 41 U.S.C. Secs. 601-613, provides that Board decisions are final, except that appeals may be taken to the Federal Circuit. 41 U.S.C. Sec. 607(g)(1); see also 28 U.S.C. Sec. 1295(a)(1) (granting to the Federal Circuit exclusive jurisdiction over appeals brought under section 607(g)(1)). Where, as here, a district court refers a case to an agency under the primary jurisdiction doctrine, and exclusive authority to review the agency's determination is granted to a court other than the referring district court, the district court is bound by determinations made in the collateral administrative proceedings and may not itself review the merits of the agency's decision. Port of Boston Marine Terminal Ass'n v. Rederiaktiebolaget Translantic (Port of Boston), 400 U.S. 62, 64, 69-71, 91 S.Ct. 203, 206, 208-09, 27 L.Ed.2d 203 (1970). The district court is "under a duty to stay its proceedings pending ... review" of the agency's findings. Pennsylvania R.R. v. United States, 363 U.S. 202, 206, 80 S.Ct. 1131, 1133, 4 L.Ed.2d 1165 (1960). Thus, if the primary jurisdiction doctrine applies in this case, the district court must both await the outcome of any appeal that may be taken from the ASBCA and accept the contract construction arrived at in the collateral proceedings. ⁴ Even if Port of Boston did not require the district court to accept the ASBCA's or the Federal Circuit's interpretation of the disputed agreements, traditional collateral estoppel doctrine very well could. See United States v. Stauffer Chemical Co., 464 U.S. 165, 104 S.Ct. 575, 78 L.Ed.2d 388 (1984) (holding that the doctrine of mutual defensive collateral estoppel is applicable against the government to preclude relitigation of the same issue already litigated against the same party in another case involving the same facts). ⁵ The Supreme Court has held that "the doctrine of collateral estoppel is not made inapplicable by the fact that this is a criminal case, whereas the prior proceedings were civil in character." Yates v. United States, 354 U.S. 298, 335, 77 S.Ct. 1064, 1085, 1 L.Ed.2d 1356 (1957); see also People v. Sims, 32...