Woodward Governor Co. v. Curtiss Wright Flight Systems, Inc.

• Decision Date: 08 January 1999
• Docket Number: Docket No. 98-7910,CURTISS-WRIGHT
• Citation: 164 F.3d 123
• Parties: WOODWARD GOVERNOR CO., Plaintiff-Appellant, v.FLIGHT SYSTEMS, INC., Defendant-Appellee.
• Court: U.S. Court of Appeals — Second Circuit

Page 123

164 F.3d 123

WOODWARD GOVERNOR CO., Plaintiff-Appellant, v. CURTISS-WRIGHT FLIGHT SYSTEMS, INC., Defendant-Appellee.

Docket No. 98-7910

United States Court of Appeals Second Circuit.

Argued Oct. 21, 1998.

Decided Jan. 8, 1999.

Christopher M. Curran, White & Case, Washington, D.C. (J. Christian Word, of counsel), for Appellant.

Steven R. Humphrey, Robinson & Cole LLP, Hartford, CT (Craig A. Raabe, Bradford S. Babbitt, of counsel), for Appellee.

Before: WALKER and McLAUGHLIN, Circuit Judges, and PRESKA, District Judge. ^*

McLAUGHLIN, Circuit Judge:

BACKGROUND

In 1990, the United States contracted with the Lockheed Corporation ("Lockheed"), for the design and manufacture of a new fighter plane, the F-22 "Raptor." As is typical in such cases, a series of subcontracts ensued. Lockheed subcontracted the weapons bay doors to Curtiss-Wright Flight Systems, Inc. ("Curtiss-Wright"). Curtiss-Wright, in turn, chose the plaintiff, Woodward Governor Co. ("Woodward"), to produce "test stands" that would allow the bay doors to be tested before they were actually installed in the F-22. It is this latter subcontract that generated this litigation.

The subcontract between Curtiss-Wright and Woodward set a price of $1.5 million for the test stands. It provided that the subcontract was governed by New Jersey law unless New Jersey law was "not dispositive," in which case the "federal common law of government contracts" governed. The subcontract also contained provisions relating to the rights and responsibilities of the parties vis a vis the federal government.

In January 1994, Woodward began work on the test stands. The work quickly fell behind schedule, however, because Curtiss-Wright had not yet finished designing the weapons bay doors. In late 1995, Curtiss-Wright ordered Woodward to bring the unfinished test stands to Curtiss-Wright's facility in New Jersey, even though under the subcontract delivery of the test stands by Woodward to Curtiss-Wright was not yet due. To meet this demand, Woodward was forced to transport its materials and employees to New Jersey to continue work on the test stands at Curtiss-Wright's facility. This, of course, caused further delay and added expense.

Throughout 1995, Curtiss-Wright remained unable to provide Woodward with prototypes of the weapons bay doors. In exasperation, Woodward demanded that Curtiss-Wright provide the weapons bay doors by January 1996, at the latest. Curtiss-Wright responded that it could not provide the bay doors until May 1996. In the end, Curtiss-Wright never provided Woodward with a prototype.

By August 2, 1996, Curtiss-Wright had paid Woodward all the progress payments called for by the subcontract, with only the last $317,000 progress payment still due. However, as a result of the substantial delays and the need to work on the test stands at Curtiss-Wright's facility, Woodward concluded that construction of the test stands would cost substantially more than the $1.5 million originally agreed upon. Woodward thus sought to re-negotiate the terms of the subcontract. After a flurry of correspondence about who would pay for the cost over-runs, Curtiss-Wright broke off the negotiations by informing Woodward that it considered Woodward to have defaulted on the subcontract. Curtiss-Wright then engaged another company to complete construction of the test stands.

In December 1997, Woodward filed suit in the United States District Court for the District of Connecticut (Covello, Judge ), seeking damages and declaratory relief for Curtiss-Wright's alleged breach of the subcontract. Subject matter jurisdiction was premised on a federal question under 28 U.S.C. § 1331. It is undisputed that there is no diversity under 28 U.S.C. § 1332.

Curtiss-Wright moved to dismiss the complaint, arguing that there is no federal question because none of Woodward's claims is governed by federal law. Woodward countered that federal common law governs because its claims arise out of the breach of a subcontract relating to defense procurement. Judge Covello concluded that federal common law does not apply and dismissed the complaint under Fed.R.Civ.P. 12(b)(1) for lack of subject matter jurisdiction.

Woodward now appeals, advancing three main arguments for its position: (1) the nature of the subcontract requires that this case be governed by federal common law; (2) the parties elected to be governed by federal common law; and (3) Woodward's claim for equitable relief under federal law requires the application of federal common law.

DISCUSSION

The sole issue is whether the district court had subject matter jurisdiction. We review the factual findings of the district court on a motion to dismiss for lack of subject matter jurisdiction for clear error, while we review the district court's legal conclusions de novo. See Wake v. United States, 89 F.3d 53, 57 (2d Cir.1996). We conclude that Curtiss-Wright is correct, and federal common law does not apply in this breach of contract suit. Because there is no other basis for federal subject matter jurisdiction, we affirm Judge Covello's dismissal of the complaint.

It is beyond dispute that if federal common law governs a case, that case presents a federal question within the subject matter jurisdiction of the federal courts, just as if the case were governed by a federal statute. See 28 U.S.C. § 1331; Illinois v. City of Milwaukee, 406 U.S. 91, 100, 92 S.Ct. 1385, 31 L.Ed.2d 712 (1972).

Although "there is no federal general common law," federal common law sometimes controls certain issues and certain types of cases. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938) (emphasis added). For example, questions about privilege in federal question cases are resolved by the federal common law. See Fed.R.Evid. 501. Similarly, suits involving maritime claims are governed by the venerable federal common law of admiralty. See, e.g., Southern Pac. Co. v. Jensen, 244 U.S. 205, 215, 37 S.Ct. 524, 61 L.Ed. 1086 (1917).

However, the various bailiwicks of federal common law are limited in number. See O'Melveny & Myers v. FDIC, 512 U.S. 79, 87, 114 S.Ct. 2048, 129 L.Ed.2d 67 (1994) ("cases in which judicial creation of a special federal rule would be justified ... are ... 'few and restricted' " (quoting Wheeldin v. Wheeler, 373 U.S. 647, 651, 83 S.Ct. 1441, 10 L.Ed.2d 605 (1963))). Woodward asserts that this is one of those rare cases where federal common law controls, because it involves a subcontract on a government project that relates to national defense.

In recent years, the Supreme Court has sought to clarify when federal common law enters the picture. See Atherton v. FDIC, 519 U.S. 213, 117 S.Ct. 666, 670, 136 L.Ed.2d 656 (1997); Boyle v. United Technologies Corp., 487 U.S. 500, 504-07, 108 S.Ct. 2510, 101 L.Ed.2d 442 (1988); but see 19 Charles Allan Wright, et al., Federal Practice and Procedure § 4514, at 458-59 (1996) (Court's attitude produces "an anomaly," and there are no bright-line rules). The Court has explained that, as a threshold matter, a case must implicate "uniquely federal interests" for federal common law to apply. Boyle, 487 U.S. at 504, 108 S.Ct. 2510 (internal quotation marks omitted). As Justice Scalia explained in Boyle, such interests arise only in a few areas, such as: (1) the obligations to, and rights of, the United States under its contracts; (2) the liability of federal officers for official acts; and (3) civil liabilities arising out of federal procurement contracts relating to national defense. See id. At 504-06; Erwin Chemerinsky, Federal Jurisdiction §§ 6.2 at 337-52 (2d ed.1994).

Even when "uniquely federal interests" are implicated, federal common law applies only where there is a "significant conflict between some federal policy or interest and the use of state law." O'Melveny, 512 U.S. at 87, 114 S.Ct. 2048; see Boyle, 487 U.S. at 504, 108 S.Ct. 2510; United States v. Kimbell Foods, Inc., 440 U.S. 715, 728-29, 99 S.Ct. 1448, 59 L.Ed.2d 711 (1979). A "significant conflict" of the type required by these cases occurs when the application of state law would run counter to a federal policy or interest. See O'Melveny, 512 U.S. at 87-88, 114 S.Ct. 2048; Pescatore v. Pan American World Airways, Inc., 97 F.3d 1, 11 (2d Cir.1996). In the absence of a significant conflict, "a mere federal interest in uniformity is insufficient to justify displacing state law in favor of a federal common law rule." B.F. Goodrich v. Betkoski, 112 F.3d 88, 90 (2d Cir.1997) (per curiam), cert. denied sub nom. Zollo Drum Co. v. B.F. Goodrich Co., --- U.S. ----, 118 S.Ct. 2318, 141 L.Ed.2d 694 (1998); see O'Melveny, 512 U.S. at 88, 114 S.Ct. 2048. Finally, an actual, significant conflict between a federal interest and state law must be "specifically shown," and not generally alleged. Atherton, 117 S.Ct. at 670; see O'Melveny, 512 U.S. at 87-88, 114 S.Ct. 2048.

Commentators have noted that in disputes between two private parties, federal courts since O'Melveny have shown a marked reluctance to displace state law by finding a significant conflict with a federal interest. See, e.g., 19 Wright § 4514, at 458-59 & nn. 22-23; Chemerinsky, § 6.2.3, at 348-49. Thus, a plaintiff seeking to apply federal common law where the United States is not even a party faces a substantial burden in trying to demonstrate an actual, significant conflict between state law and a federal interest. See O'Melveny, 512 U.S. at 88, 114 S.Ct. 2048; B.F. Goodrich, 112 F.3d at 90.

Woodward accepts these principles in the abstract, but argues that federal common law applies here because: (1) the subcontract between Woodward and Curtiss-Wright relates to national defense, which Woodward asserts is an issue of "uniquely federal interest"; and (2) application of New Jersey law would conflict with the federal interest in having a uniform legal standard apply to all its defense procurement contracts.

A. Issue of Uniquely Federal Interest

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