U.S. v. Grumman Aerospace Corp.

• Decision Date: 27 February 1991
• Docket Number: No. 90-1217,90-1217
• Citation: 927 F.2d 575
• Parties: , 36 Cont.Cas.Fed. (CCH) 76,013 The UNITED STATES, Appellant, v. GRUMMAN AEROSPACE CORPORATION, Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

Page 575

927 F.2d 575

59 USLW 2536, 36 Cont.Cas.Fed. (CCH) 76,013

The UNITED STATES, Appellant, v. GRUMMAN AEROSPACE CORPORATION, Appellee.

No. 90-1217.

United States Court of Appeals, Federal Circuit.

Feb. 27, 1991.

Peter G. Barber, Commercial Litigation Branch, Dept. of Justice, of Washington, D.C., argued for appellant. 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 were C. John Turnquist, Associate General Counsel and James T. DeLanoy, Sr. Trial Counsel, Litigation Office, Dept. of the Navy, of counsel.

Gene Perry Bond, of Washington, D.C., argued for appellee. With him on the brief were Lynda Troutman O'Sullivan, John M. Devaney and Perkins Coie. Also on the brief was Raphael Mur, Vice President, General Counsel and Secretary, Grumman Aerospace Corp., of counsel.

Before MARKEY, Circuit Judge, ^* MILLER, Senior Circuit Judge, and MICHEL, Circuit Judge.

MARKEY, Circuit Judge.

In our non-precedential opinion of October 1, 1990, United States v. Grumman Aerospace Corp., 918 F.2d 185 (Fed.Cir.1990) (table), we vacated the decision of the Armed Services Board of Contract Appeals (Board), Grumman Aerospace Corp., No. 34665, 90-1 B.C.A. (CCH) p 22,417, 1989 WL 222679 (1989). In that vacated decision, the Board had required the United States to pay contract "costs" presented in a January 1987 claim of Grumman Aerospace Corporation (GAC). We held that the Board lacked jurisdiction because GAC failed to comply with the certification requirement of the 1978 Contract Disputes Act, 41 U.S.C. Sec. 605(c)(1) (1988) (the statute) as implemented by Federal Acquisition Regulation 33.207(c)(2), 48 C.F.R. Sec. 33.207(c)(2) (1989) (the regulation). On October 10, 1990, the government requested, pursuant to Rule 47.8(d), that we render our October 1, 1990 opinion precedential because of its "widespread legal interest." On October 15, 1990, GAC filed a "Petition for Rehearing and Suggestion for Rehearing in Banc." ¹

We grant the government's request, grant GAC's Petition to the extent of considering and disposing of the arguments there presented, and adhere to the result set forth in our decision of October 1, 1990.

I. BACKGROUND

This dispute began on February 10, 1986, when the Defense Contract Audit Agency (DCAA) issued forty-three Notices of Contract Costs Suspended and/or Disapproved against forty-three of GAC's cost reimbursable contracts. The notices disallowed, as contract costs, dividend payments on restricted Grumman stock awarded to GAC employees under Grumman's Restricted Stock Award Plan (RSAP). On January 7, 1987, GAC submitted an uncertified claim for the disallowed amount of $48,707 and for similar dividend payments and requested that the contracting officer render a final decision holding that RSAP dividend payments constitute allowable compensable costs. In a letter dated January 19, 1987, Mr. C.A. Paladino, Senior Vice President and Treasurer of GAC, purported to certify the previously submitted uncertified claim.

In a final decision dated March 4, 1987, the Department of the Navy's Corporate Administrative Contracting Officer (CACO) denied GAC's entire claim. GAC appealed to the Board on April 1, 1987 and the government moved to dismiss for lack of jurisdiction, contending that the claim had not been properly certified.

On October 24, 1989, the Board held GAC entitled to recover the cost of the restricted stock dividend payments to its employees. The Board denied the government's motion to dismiss, saying: "As Senior Vice President and Treasurer, Mr. Paladino was a proper official within the organization to make the certification...." Grumman, 90-1 B.C.A. (CCH) p 22,417, at 112,606. In support of that conclusion, the Board made two subsidiary findings: (1) "At the time of certification, Paladino's functions included overall responsibility for GAC's financial affairs," Grumman, 90-1 B.C.A. (CCH) p 22,417, at 112,601 (Finding of Fact 7); and (2) "Paladino, who provided the certification, reports directly to the President of GAC." Id. (Finding of Fact 8). The government does not contest those findings, but says it "challenge[s] the [Board's] legal conclusion that these two findings of fact establish that Mr. Paladino was the proper person to certify GAC's claim."

GAC challenges the validity of the regulation, saying it was promulgated without legislative authority and is in conflict with the statute. In the alternative, assuming validity of the regulation, GAC contends that Mr. Paladino is an appropriate officer to certify the claim. GAC further argues that the effect of our reversal here is to require certification by, and only by, Chief Executive Officers (what GAC calls a "CEO Only" rule).

II. ISSUES

A. Whether the regulation is a reasonable interpretation of the statute.

B. Whether the government properly raised an issue of the Board's jurisdiction.

C. Whether GAC complied with the statute's certification requirement, as implemented by the regulation, with its January 19, 1987 letter signed by Mr. Paladino.

III. OPINION

A. Validity of the Regulation

The statute provides in pertinent part:

For claims of more than $50,000, the contractor shall certify that the claim is made in good faith, that the supporting data are accurate and complete to the best of his knowledge and belief, and that the amount requested accurately reflects the contract adjustment for which the contractor believes the government is liable.

Clearly, certification is required for claims in excess of $50,000. W.M. Schlosser Co. v. United States, 705 F.2d 1336, 1338 (Fed.Cir.1983).

The regulation provides that individuals who may properly certify non-individual contractor claims amounting to more than $50,000 may be drawn from either of two categories:

(i) A senior company official in charge at the contractor's plant or location involved; or

(ii) An officer or general partner of the contractor having overall responsibility for the conduct of the contractor's affairs.

GAC contends that the regulation is invalid to the extent that it imposes certification requirements beyond "the contractor shall certify" language of the statute. GAC would apply agency principles to determine who may properly certify the contractor's claims. However, nothing in the statute nor in its legislative history either requires or suggests that approach. The statute, being silent on the question of the individual who may certify a claim for a non-individual contractor, leaves a gap. GAC fails to distinguish between a prohibited ultra vires regulation and a permissible act of administrative gap-filling.

In Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 843-44, 104 S.Ct. 2778, 2781-83, 81 L.Ed.2d 694 (1984), the Supreme Court held that

If Congress has explicitly left a gap for the agency to fill, there is an express delegation of authority to the agency to elucidate a specific provision of the statute by regulation. Such legislative regulations are given controlling weight unless they are arbitrary, capricious, or manifestly contrary to the statute. Sometimes the legislative delegation to an agency on a particular question is implicit rather than explicit. In such a case, a court may not substitute its own construction of a statutory provision for a reasonable interpretation made by the administrator of an agency.

(footnotes omitted); see also New York Guardian Mortgagee Corp. v. United States, 916 F.2d 1558, 1559 (Fed.Cir.1990). The regulation is clearly within the congressionally delegated authority of the Office of Federal Procurement Policy "to issue guidelines with respect to criteria for the ... functions ... of the agency boards ..." that "may be necessary or desirable to carry out the provisions of this chapter...." 41 U.S.C. Sec. 607(h) (1988). Further, it is entirely consistent with the statutory section here involved, merely serving to fill the gap implicitly left by Congress respecting who may certify pursuant to that section. As this court has noted:

The [CDA] merely provides that "the contractor shall certify." The regulation constitutes a reasonable explication of how the "contractor" shall certify, i.e., it identifies the individuals within the contractor's organization who properly may act for the contractor in certifying. Cf. INS v. Jong Ha Wang, 450 U.S. 139, 144-45, 101 S.Ct. 1027, 1031, 67 L.Ed.2d 123 (1981). In terms of Admiral Rickover's suggestion, the regulation specifies the "senior responsible contractor official[s]" who are authorized to sign the certification.

The certification requirement furthers an important objective of Congress by "trigger[ing] a contractor's potential liability for a fraudulent claim under section 604 of the Act," Skelly & Loy v. United States, 231 Ct.Cl. 370, 685 F.2d 414, 418 n. 11 (1982), and thus " 'discourag[ing] the submission of unwarranted contractor claims.' " Paul E. Lehman, Inc. v. United States, 673 F.2d 352, 354 (Ct.Cl.1982) (quoting S.Rep. No. 1118, 95th Cong., 2d Sess. 5, reprinted in 1978 U.S.Code Cong. & Admin.News 5235, 5239). "Congress wanted to hold the contractor personally liable, and it considered the best way to do this would be to require contractors personally to certify their claims." Donald M. Drake Co. v. United States, 12 Cl.Ct. 518, 519 (1987). The regulation properly implements this objective by specifying the persons in the contractor's organization who may certify a claim.

Ball, Ball & Brosamer, Inc. v. United States, 878 F.2d 1426, 1429 (Fed.Cir.1989) (emphasis added).

Accordingly, we decline GAC's invitation to ignore Ball as precedent. On the contrary, we expressly hold that the regulation is not unreasonable, and that it is in furtherance of congressional objectives, is unambiguous, and must be applied literally. See id. (holding the regulation "unambiguous" and directing that it be applied "as written"). In sum, the...