United States v. Renda

Decision Date20 February 2013
Docket NumberNo. 11–41203.,11–41203.
Citation709 F.3d 472
PartiesUNITED STATES of America, Plaintiff–Appellee v. Oscar RENDA, Defendant–Appellant.
CourtU.S. Court of Appeals — Fifth Circuit

OPINION TEXT STARTS HERE

John Robert Kresse, Trial Attorney, U.S. Department of Justice, Civil Div., Commercial Litigation Branch, Charles Edward Canter, Trial Attorney, U.S. Department of Justice, Civil Division, Washington, DC, J. Kevin McClendon, U.S. Attorney's Office, Eastern District of Texas, Plano, TX, Paul Alexander Petty, U.S. Army Corps of Engineers, Galveston, TX, for PlaintiffAppellee.

David E. Keltner, Marianne Marsh Auld, Jody Scott Sanders, William Nolan Warren, Jeffrey Eric Whitfield, Kelly, Hart & Hallman, L.L.P., Fort Worth, TX, for DefendantAppellant.

Appeal from the United States District Court for the Eastern District of Texas.

Before DeMOSS, SOUTHWICK, and HIGGINSON, Circuit Judges.

HIGGINSON, Circuit Judge.

This case, which arose out of a government dredging contract, requires us to delimit the scope of a corporate officer's personal liability under 31 U.S.C. § 3713 (the “Priority Statute). Specifically, we are called upon to decide (1) whether the decision of a contracting officer rendered pursuant to the Contract Disputes Act of 1978, as amended, 41 U.S.C. § 7101 et seq. (the “CDA”), constitutes a “claim” within the meaning of the Priority Statute, and, if so, (2) whether a debtor's representative has “notice” of that claim, necessary to trigger personal liability under the Priority Statute, if he has actual knowledge of its existence but relies on the erroneous advice of counsel as to its validity. Answering both questions affirmatively, we AFFIRM.

FACTS AND PROCEEDINGS

In 1998, the United States Army Corps of Engineers (the Corps) awarded Contract No. DACW–99–C–0001 (the “Dredging Contract”) to Renda Marine, Inc. (“Renda Marine”), in the estimated amount of $12,526,100, to dredge a portion of the Houston–Galveston navigation channel. As a contract made by an executive agency for the procurement of services, the Dredging Contract was governed by the CDA, which requires, inter alia, that claims by either party “relating to” a government contract be submitted to the contracting officer (“CO”) for a written decision. 41 U.S.C. § 7103(a)(1), (d).

Between January and October 2001, Renda Marine submitted eight claims, including seven “differing site condition” claims and one “constructive contract modification” claim, to Contracting Officer Thomas Benero (“CO Benero”), Chief of the Contracting Division for the Corps in Galveston, Texas. In response, the Corps issued Modification No. P00023, which provided for a $3,083,833 equitable adjustment in contract price for additional dredge work completed by Renda Marine in the “flare” area of the channel. CO Benero did not timely issue a final decision on Renda Marine's remaining claims and, as a result, they were considered denied. See Renda Marine, Inc. v. United States, 71 Fed.Cl. 782, 784 & n. 2 (2006) (referencing a previous version of 41 U.S.C. § 7103(f)(5), which read: “Any failure by the contracting officer to issue a decision on a contract claim within the period required will be deemed to be a decision by the contracting officer denying the claim and will authorize the commencement of the appeal.”). On April 11, 2002, Renda Marine timely appealed the denial of its claims to the Court of Federal Claims. 1Id.

On November 26, 2002, while Renda Marine's case was pending before the Court of Federal Claims, CO Benero issued a final decision (the “Final Decision”) on six counterclaims submitted by the government against Renda Marine for incomplete and deficient work. After setting forth the “items determined to be deficient or incomplete or not in accordance with the contract specifications,” the Final Decision “determine[d] that Renda Marine is indebted to the Government in the amount of $11,860,000,” plus interest, for the estimated completion costs, directed the company to submit payment by certified check, and notified the company of the statutory avenues of appeal. The Final Decision was addressed to Oscar Renda (Renda), the president and majority shareholder of Renda Marine at the time, who later acknowledged receiving and reading it.

After reviewing the Final Decision, Renda called Brian Erikson, an attorney with Quilling, Selander, Lownds, Winslett & Moser, P.C. (“Quilling Selander”), the firm that was representing Renda Marine in the matter pending before the Court of Federal Claims, to seek legal advice on how Renda Marine should proceed. According to Renda, Erikson advised him that the Final Decision “did not require action by Renda Marine” because “any claim the Government made should be addressed in the pending [litigation] before the Court of Federal Claims, so that Benero's findings and decision were void.” Consistent with Erikson's advice, Renda Marine did not timely appeal the Final Decision to the ASBCA or Court of Federal Claims.

On July 31, 2003, Renda caused Renda Marine to transfer all of its assets, totaling $8,563,066, to its unsecured creditors in the following amounts: $5,932,900 to Oscar Renda Contracting, Inc.; $484,500 to Renda Environmental, Inc.; $325,000 to Oscar Renda; and $325,000 to Rudolph Renda (the July 2003 transfer). On the date of the transfer, Renda Marine's debts, not including the $11.86 million debt asserted in the Final Decision, exceeded the value of its assets by $7,988,798.

In July 2004, Renda Marine moved for leave to amend its complaint in the Court of Federal Claims to challenge the Final Decision. Renda Marine, Inc. v. United States, 65 Fed.Cl. 152, 156 (2005). After hearing oral argument, the Court of Federal Claims denied the motion on the ground that the period for timely appeal of the Final Decision had expired seven months earlier and, accordingly, the court lacked jurisdiction under the CDA to consider it. Id. at 156–63. Renda Marine attempted, without success, to relitigate the issue twice during pretrial proceedings, twice during trial, and twice after trial. Id. at 153–57;Renda Marine, Inc. v. United States, 71 Fed.Cl. 782 (2006). After a nineteen-day trial, the Court of Federal Claims ruled on the merits of Renda Marine's claims against the government, concluding that Renda Marine “failed to prove by a preponderance of the credible evidence that it is entitled to recoveron its claims.” Renda Marine, Inc. v. United States, 66 Fed.Cl. 639, 721 (2005). The court denied Renda Marine's motion for reconsideration and entered final judgment in favor of the government. Renda Marine, Inc. v. United States, 71 Fed.Cl. 782 (2006). The judgment was affirmed on appeal to the Federal Circuit. Renda Marine, Inc. v. United States, 509 F.3d 1372 (Fed.Cir.2007).

In 2005, Renda Marine asserted a malpractice claim against Quilling Selander for failing to timely challenge the Final Decision, and ultimately settled the claim for $2 million. Several days after receiving the $2 million settlement, Renda caused Renda Marine to transfer the settlement money to Oscar Renda Contracting, Inc. to repay advances it allegedly had made for Renda Marine's legal expenses (the December 2005 transfer”). On the date of the transfer, Renda Marine's debts exceeded the value of its assets.

In 2008, the government sued Renda Marine in the United States District Court for the Eastern District of Texas to recoup the $3,083,833 equitable adjustment and to enforce the $11,860,016 claim asserted in the Final Decision. United States v. Renda Marine, Inc., 750 F.Supp.2d 755, 758–59 (E.D.Tex.2010). The district court granted the government's motion for judgment on the pleadings, id. at 760–67, and entered judgment for the government in the amount of $22,060,392.78, including interest and penalties. On appeal, we affirmed the judgment. United States v. Renda Marine, Inc., 667 F.3d 651 (5th Cir.2012).

In 2009, the government commenced this action, seeking to hold Renda personally liable under the Priority Statute for the amount of the July 2003 and December 2005 transfers he made on behalf of Renda Marine. Renda raised a number of affirmative defenses attacking the merits of the Final Decision, and, through a counterclaim, sought review of the Final Decision under the Administrative Procedure Act (“APA”). The government moved to dismiss Renda's counterclaim and to strike his affirmative defenses for lack of subject-matter jurisdiction. Adopting the report and recommendation of Magistrate Judge Bush, the district court granted the motion. The parties later filed cross-motions for summary judgment, and Renda moved for reconsideration of the district court's dismissal of his counterclaim and affirmative defenses. Again adopting the report and recommendation of Magistrate Judge Bush, the district court granted the government's motion for summary judgment and denied Renda's motions for summary judgment and reconsideration. On September 30, 2011, the district court entered final judgment in favor of the government in the amount of $12,468,588.94, the combined value of the two transfers, plus interest. Renda timely appealed.

STANDARDS OF REVIEW

We review a district court's summary judgment de novo, applying the same standard as the district court. Moss v. BMC Software, Inc., 610 F.3d 917, 922 (5th Cir.2010). Summary judgment is warranted if, viewing all evidence in the light most favorable to the non-moving party, the record demonstrates that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. Id. (citing Fed.R.Civ.P. 56(a)). A fact is material if it “might affect the outcome of the suit under the governing law,” and a dispute is genuine if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

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