Wright v. U.S. Postal Service

• Decision Date: 08 June 1994
• Docket Number: No. 93-55069,93-55069
• Citation: 29 F.3d 1426
• Parties: 39 Cont.Cas.Fed. (CCH) P 76,686 Calvin G. WRIGHT; Jack Critchfield; Desert Forest Products, Inc., d/b/a Hutchinson, Carter Company, Plaintiffs-Appellants, v. U.S. POSTAL SERVICE, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1426

29 F.3d 1426

39 Cont.Cas.Fed. (CCH) P 76,686

Calvin G. WRIGHT; Jack Critchfield; Desert Forest

Products, Inc., d/b/a Hutchinson, Carter Company, Plaintiffs-Appellants, v. U.S. POSTAL SERVICE, Defendant-Appellee.

No. 93-55069.

United States Court of Appeals, Ninth Circuit.

Submitted June 8, 1994 ^*.

Decided July 18, 1994.

Brian S. Case, Case & Associates, Costa Mesa, CA, for plaintiffs-appellants.

Russell W. Chittenden, Asst. U.S. Atty., Los Angeles, CA, for defendant-appellee.

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

Before: FLETCHER, CANBY, and HALL, Circuit Judges.

CYNTHIA HOLCOMB HALL, Circuit Judge:

Calvin Wright and other public-works subcontractors appeal the district court's determination that the Contract Disputes Act, 41 U.S.C. Secs. 601-613, eliminated subject-matter jurisdiction over their actions to establish and foreclose equitable liens against the United States Postal Service. We reverse.

I.

In 1987, the United States Postal Service ("USPS") hired RCR General Contractors, Inc. to construct a post office in Victorville, California. RCR, in turn, subcontracted with Calvin Wright, Jack Critchfield, and the Hutchinson, Carter Company (the "subcontractors") to perform various services for the project. RCR suffered financial difficulties, however, and was unable to pay the subcontractors as they fulfilled their contractual obligations. Ultimately, the USPS terminated RCR and completed the post office with another contractor.

RCR's sureties subsequently refused to pay the subcontractors for their completed work. As a result, the subcontractors filed suit in district court against the USPS, seeking to establish and foreclose equitable liens for the value of their services. The district court dismissed the actions for lack of subject-matter jurisdiction, concluding that the Contract Disputes Act precluded adjudication of subcontractor claims against the USPS. We conduct de novo review of this jurisdictional determination. E.g., Concrete Tie, Inc. v. Liberty Constr., Inc. (In re Liberty Constr., Inc.), 9 F.3d 800, 801 n. 2 (9th Cir.1993).

II.

Section 401(1) of the Postal Reorganization Act ("PRA"), 39 U.S.C. Secs. 101-5605, provides that the USPS shall have the power "to sue and be sued in its official name." Id. Sec. 401(1). This provision "constitutes a broad waiver of [the] USPS's sovereign immunity, and subjects it to 'liability ... the same as any other business.' " Hall v. Bolger, 768 F.2d 1148, 1151 (9th Cir.1985) (quoting Franchise Tax Bd. v. United States Postal Serv., 467 U.S. 512, 520, 104 S.Ct. 2549, 2554, 81 L.Ed.2d 446 (1984)).

The PRA's waiver of immunity "should be liberally construed." Franchise Tax Bd., 467 U.S. at 517, 104 S.Ct. at 2552 (quotation omitted).

[W]hen Congress establishes ... an agency, authorizes it to engage in commercial and business transactions with the public, and permits it to "sue and be sued," it cannot be lightly assumed that restrictions on that authority are to be implied. Rather, if the general authority to "sue and be sued" is to be delimited by implied exceptions, it must be clearly shown that certain types of suits are not consistent with the statutory or constitutional scheme, that an implied restriction of the general authority is necessary to avoid grave interference with the performance of a governmental function, or that for other reasons it was plainly the purpose of Congress to use the "sue and be sued" clause in a narrow sense.

Id. at 517-18, 104 S.Ct. at 2552 (quoting Federal Hous. Admin. v. Burr, 309 U.S. 242, 245, 60 S.Ct. 488, 490, 84 L.Ed. 724 (1940)). As a general matter, therefore, sovereign immunity does not shield the USPS from the subcontractors' actions to establish and foreclose equitable liens. See Pearlman v. Reliance Ins. Co., 371 U.S. 132, 140-41, 83 S.Ct. 232, 236-37, 9 L.Ed.2d 190 (1962) (describing the "equitable principle" that "laborers and materialmen ha[ve] a right to be paid out of the [government contract retention] fund"); Henningsen v. United States Fidelity & Guar. Co., 208 U.S. 404, 410, 28 S.Ct. 389, 391, 52 L.Ed. 547 (1908) (noting that the government had "equitable obligations to see that the laborers and supply men were paid"); Active Fire Sprinkler Corp. v. United States Postal Serv., 811 F.2d 747, 754 (2d Cir.1987) (explaining that "equitable rights held by subcontractors as against the USPS, which may have been unenforceable where sovereign immunity existed, became enforceable upon immunity being waived").

The district court concluded, however, that the Contract Disputes Act ("CDA"), 41 U.S.C. Secs. 601-613, overrides the PRA and precludes subcontractors from pursuing equitable claims in district court. Because we hold that this conclusion is based on the legally-incorrect premise that the CDA provides the exclusive basis for litigation of claims relating to government contracts, we reverse the district court on this point.

A.

The CDA, "which Congress enacted to standardize the previously uncoordinated systems for resolving contract disputes with the government," Liberty Constr., 9 F.3d at 801, "applies to any express or implied contract ... entered into by an executive agency for ... the procurement of services [or] the procurement of construction, alteration, repair or maintenance of real property," 41 U.S.C. Sec. 602(a). Under the CDA, "[a]ll claims by a contractor against the government relating to a contract [within the scope of the statute] ... shall be submitted to the contracting officer for a decision." Id. Sec. 605(a). Contractors may appeal the decision of the contracting officer to the Court of Federal Claims, id. Sec. 609, or an agency board of contract appeals, id. Secs. 606, 607.

According to the district court, this statutory scheme eliminated rights possessed by the subcontractors under the PRA:

The legislative history of the CDA "strongly suggests [that] Congress' understanding [was] that the [CDA] would pre-empt the entire field of government contract remedies...." Consumer Solar Electric v. U.S. Postal Service, 530 F.Supp. 702, 705 (C.D.Cal.1982). Furthermore, the CDA is a more recently enacted and specific statute than the PRA. In general, a precisely drawn statute preempts a more general one.

The CDA prevents contractors from bringing contract claims against the government in the federal district courts.... The two purposes behind the CDA are the facilitation of efficient contract dispute resolution and the formation of government contracts; allowing subcontractors to maintain suit against the Postal Service in district court would defeat these goals. An opposite ruling would lead to the anomalous result that subcontractors could litigate in district court while the contractors could not. Therefore, the Court holds that the Contract Dispute[s] Act divests this Court of subject matter jurisdiction from hearing claims from subcontractors against the Postal Service.

(citations omitted). In so holding, the court followed the decisions of three other district courts, all of which concluded that the CDA's preemption of district court jurisdiction extends to subcontractor claims. See Biebel Bros. v. United States Postal Serv., 772 F.Supp. 1117, 1118 (E.D.Mo.1991) (the CDA preempts a subcontractor's quantum meruit action against the USPS for failure to obtain a Miller Act security bond); Carroll v. United States Postal Serv., 764 F.Supp. 143, 144-45 (E.D.Mo.1991) (same); Eastern, Inc. v. Shelly's, Inc., 721 F.Supp. 649, 650-53 (D.N.J.1989) (the CDA preempts a subcontractor's action against the USPS for an equitable lien).

B.

Despite its logical appeal, the district court's analysis (like the analysis of the other district courts to consider this issue) is flawed because it presumes that the CDA "pre-empt[s] the entire field of government contract remedies." Although the court arguably was justified in making such a presumption at the time it rendered its decision, see Prefab Prods., Inc. v. United States Postal Serv., 600 F.Supp. 89, 91 (S.D.Fla.1984) ("the Contract Disputes Act ... pre-empts whatever jurisdiction federal district courts previously had under [the PRA] and confers exclusive jurisdiction of contract claims against the Postal Service in the United States Court of Claims"); Consumers Solar Elec. Power Corp. v. United States Postal Serv., 530 F.Supp. 702, 706 n. 3 (C.D.Cal.1982) ("the Contract Disputes Act implicitly repeals [the sovereign immunity waiver] of the Postal Reorganization Act ... as to contract claims against USPS"); but see North Side Lumber Co. v. Block, 753 F.2d 1482, 1486 (9th Cir.) (the CDA does not "divest[ ] the district court of jurisdiction over all actions relating to the contracts brought under any head of jurisdiction"), cert. denied, 474 U.S. 919, 106 S.Ct. 248, 88 L.Ed.2d 256 (1985), the law of the Ninth Circuit now compels the opposite conclusion.

In Concrete Tie, Inc. v. Liberty Construction, Inc. (In re Liberty Construction, Inc.), 9 F.3d 800 (9th Cir.1993), we recently considered a highly analogous question and concluded that the CDA did not preempt a contractor from bringing an indemnification action against the Small Business Administration ("SBA") under the "sue and be sued" provision of the Small Business Act, 15 U.S.C. Sec. 634(b)(1). Id. at 801-02. In so holding, we rejected the SBA's contention that the CDA, which withdrew a statutory provision (the Tucker Act) granting independent federal jurisdiction over some government contract claims, nullified other jurisdictional bases for contract-related suits against the agency:

... The government would have us broadly interpret [the statute] as withdrawing all district court jurisdiction over contract claims within the scope of the CDA, regardless of independent statutory grants of jurisdiction such as the "sue and be sued" provision of the Small Business Act.

We disagree.... In North Side Lumber Co. v. Block, 753 F.2d...