BOAZ HOUSING AUTHORITY, ET AL., Plaintiffs-Appellees v. UNITED STATES, Defendant-Appellant
2019-2325
United States Court of Appeals for the Federal Circuit
April 16, 2021
Appeal from the United States Court of Federal Claims in No. 1:17-cv-01797-EDK, Judge Elaine Kaplan.
CARL COAN, III, Coan & Lyons, Washington, DC, for plaintiffs-appellees.
ANNA BONDURANT ELEY, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC, for defendant-appellant. Also represented by JEFFREY B. CLARK, ROBERT EDWARD KIRSCHMAN, JR., FRANKLIN E. WHITE, JR.
Before NEWMAN, O‘MALLEY, and WALLACH, Circuit Judges.
The government appeals from a decision of the United States Court of Federal Claims (“Claims Court“) denying its motion to dismiss for lack of subject matter jurisdiction and failure to state a claim. See Boaz Hous. Auth. v. United States, 141 Fed. Cl. 74 (2018). For the reasons explained below, we affirm.
I. BACKGROUND
A. The Statutory Framework
Section 9 of the United States Housing Act of 1937 (“Housing Act“) provides two funds for public housing: the Capital Fund and the Operating Fund.
Congress tasked the United States Department of Housing and Urban Development (“HUD“) with allocating amounts in the Capital Fund and Operating Fund to eligible public housing agencies. See
Section 9 of the Housing Act constrains the ways in which PHAs may use their
Finally, the Housing Act authorizes HUD to sanction a PHA that receives assistance under Section 9 of the Housing Act if HUD finds that the PHA “has failed to comply substantially with any provision of this chapter relating to the public housing program.” See
B. The PHAs’ Breach of Contract Claim
Each of the 553 PHAs in this case executed an Annual Contributions Contract (“ACC“) with HUD. HUD regulations define an ACC as “a contract prescribed by HUD for loans and contributions, which may be in the form of operating subsidy, whereby HUD agrees to provide financial assistance and the PHA agrees to comply with HUD requirements for the development and operation of its public housing projects.” See
HUD‘s definition comports with the terms of HUD‘s standard form “Consolidated Annual Contributions Contract Between Housing Authority and the United States of America.” See J.A. 124-38. The contract requires HUD to “provide annual contributions to the [PHA] in accordance with all applicable statutes, executive orders, regulations, and this ACC.” J.A. 128. It also requires the PHA to “develop and operate all projects covered by this ACC in compliance with all the provisions of this ACC and all applicable statutes, executive orders, and regulations issued by HUD, as they shall be amended from time to time.” J.A. 129.
The standard form ACC also incorporates by reference HUD‘s regulations contained in Title 24 of the Code of Federal Regulations. See J.A. 127, 129. Relevant to this appeal is
In 2012, Congress made insufficient funds available when it funded only approximately 80% of the total operating subsidies of all PHAs (the plaintiffs here and others). See Consolidated and Further Continuing Appropriations Act, 2012, Pub. L. No. 112-55, 125 Stat. 552, 680 (2011). Congress also directed HUD to “take into
The PHAs in this case brought suit in the Claims Court under the Tucker Act,
The PHAs moved for summary judgment as to liability, and the government moved to dismiss pursuant to Rule 12(b)(1) and 12(b)(6) of the Rules of the Court of Federal Claims (“RCFC“). The Claims Court stayed further briefing on the PHAs’ motion for summary judgment pending resolution of the government‘s motion to dismiss. As to jurisdiction, the government argued that the allegedly breached provisions of the ACCs did not mandate an award of money damages in the event of breach because the true nature of the PHAs’ claim is the violation of a regulation that implements a non-money mandating statutory scheme. According to the government, the statutory scheme was not money-mandating because it attached strings to the PHAs’ use of their operating subsidies. As to the merits, the government similarly argued that the PHAs were not entitled to an unrestricted money judgment under any law or contract with HUD.
The Claims Court denied the government‘s motion to dismiss. The Claims Court first concluded that the PHAs’ claim was contract-based because contractual provisions that “were required by and incorporated governing regulations” are not “any less contractual obligations or provisions.” Boaz, 141 Fed. Cl. at 80 (quoting San Juan City Coll. v. United States, 391 F.3d 1357, 1360 (Fed. Cir. 2004)). The court found that “the essential purpose of the ACCs is to contractually obligate HUD to pay monetary subsidies to Plaintiffs in exchange for their operation of public housing projects in accordance with regulatory and statutory requirements.” Id. at 82. The Claims Court then held that the “strings-attached” nature of the operating subsidy did not preclude the court from exercising Tucker Act jurisdiction over the PHAs’ claim. Id. The court distinguished both Lummi Tribe of the Lummi Reservation v. United States, 870 F.3d 1313 (Fed. Cir. 2017), and National Center for Manufacturing Sciences v. United States (NCMS), 114 F.3d 196 (Fed. Cir. 1997), because (1) the PHAs sought compensatory damages for their losses from the government‘s failure to meet a past-due obligation and not equitable relief to enforce a regulatory obligation and (2) the PHAs’ claim is based on a breach of contract and not a statute. Boaz, 141 Fed. Cl. at 83-84.
After the Claims Court denied its motion to dismiss, the government did not oppose the PHAs’ motion for summary judgment on liability in light of Public Housing Authorities Directors Ass‘n v. United States (PHADA), 130 Fed. Cl. 522 (2017), but reserved its right to appeal the Claims Court‘s judgment.2 The Claims
On June 25, 2019, the Claims Court entered judgment pursuant to Rule 54(b) of the RCFC. The government timely appealed to this court. We have jurisdiction pursuant to
II. DISCUSSION
A. Standard of Review
We review the denial of a motion to dismiss for lack of jurisdiction de novo. Inter-Tribal Council of Ariz., Inc. v. United States, 956 F.3d 1328, 1338 (Fed. Cir. 2020). We also review the denial of a motion to dismiss for failure to state a claim de novo. See A & D Auto Sales, Inc. v. United States, 748 F.3d 1142, 1150 (Fed. Cir. 2014).
B. Rule 12(b)(1)
Under the Tucker Act, the Claims Court has jurisdiction “to render judgment upon any claim against the United States founded either upon the Constitution, or any Act of Congress or any regulation of an executive department, or upon any express or implied contract with the United States.”
In their discussions of the money-mandating requirement, the Supreme Court and this court have distinguished between claims based on the Constitution, a statute, or a regulation and claims based on a contract. See Holmes v. United States, 657 F.3d 1303, 1313-14 (Fed. Cir. 2011) (summarizing cases). For claims founded upon the Constitution, a statute, or a regulation, “a court must inquire whether the source of substantive law can fairly be interpreted as mandating compensation by the Federal Government for the damages sustained.” United States v. Mitchell, 463 U.S. 206, 218 (1983). But for claims founded upon a contract, “there is a presumption in the civil context that a damages remedy will be available upon the breach of an agreement.” Holmes, 657 F.3d at 1314 (quoting Sanders v. United States, 252 F.3d 1329, 1334 (Fed. Cir. 2001)). This presumption normally satisfies the money-mandating requirement for Tucker Act jurisdiction, “with no further inquiry being necessary.” Id.
This distinction between contracts and other sources of substantive law is logical. See id. “[D]amages are always the default remedy for breach of contract.” United States v. Winstar Corp., 518 U.S. 839, 885 & n.30 (1996) (plurality opinion) (citing, e.g., Restatement (Second) of Contracts § 346 cmt. a (Am. L. Inst. 1981)). And “[n]ormally contracts do not contain provisions specifying the basis for the award of damages in case of breach, with the exception of provisions governing damages in particular situations, such as liquidated damages for delay or other specified breaches.” San Juan, 391 F.3d at 1361; accord Holmes, 657 F.3d at 1314.
Where “relief for breach of contract could be entirely non-monetary,” moreover, the court may require a demonstration that “the agreement[] could fairly be interpreted as contemplating monetary damages in the event of breach.” Higbie v. United States, 778 F.3d 990, 993 (Fed. Cir. 2015). We will not lightly infer the premise of a Tucker Act claim, but “a fair inference will do.” United States v. White Mountain Apache Tribe, 537 U.S. 465, 473 (2003). This fair-inference inquiry, though similar to the money-mandating analysis for claims based on the Constitution, statutes, or regulations, is informed by the fact that contracts normally do not contain provisions specifying the basis for the award of damages in case of breach. See Holmes, 657 F.3d at 1314. The right to money damages is, in most instances, fairly implied.
Holmes is instructive on this point. The contracts at issue in that case were two settlement agreements of Title VII employment disputes. Id. at 1315-16. The Navy had agreed both to document in Mr. Holmes‘s Official Personnel File that he had resigned for personal reasons and to expunge a fourteen-day suspension from his record. Id. Neither term involved a payment of money. See id. We nevertheless held that the Claims Court had jurisdiction over claims alleging their breach because the purpose of those terms “clearly was to prevent Mr. Holmes from being denied future employment based on his record” and, therefore, the agreements “inherently relate to monetary compensation” through their relationship to Mr. Holmes‘s future employment. Id. at 1316. We also found probative the absence of language in the agreements “indicating that the parties did not intend for money damages to be available in the event of breach.” Id.
Higbie is a helpful contrast to Holmes. The contract at issue there was a boilerplate alternative dispute resolution agreement that “served to guide the mediation process.” Higbie, 778 F.3d at 991, 995 n.1. The plaintiff there did not argue that the agreement created “any specific duty owed by the Government that applies particularly to him.” Id. at 995 n.1. The agreement contained a non-disclosure provision and a remedy for its breach, the exclusion of statements made during mediation from unrelated proceedings. Id. at 994. We concluded that the agreement could not fairly be interpreted to contemplate money damages. Id. Higbie is consistent with Holmes because the non-monetary remedy provided in Higbie‘s alternative dispute resolution agreement supplanted the general rule that most contracts contain implied rather than express provisions specifying the basis for an award of damages in case of breach. See Holmes, 657 F.3d at 1314.
The government‘s principal argument on appeal is that the ACCs cannot fairly be interpreted to contemplate an award of money damages because, “within the statutory scheme and the parties’ contract itself, the PHAs do not have any reasonable expectation of ever being able to spend their subsidies free and clear of statutory restrictions.” Appellant‘s Br. 17-18. The government relies on both Lummi and NCMS.
Like the Claims Court, we disagree. First, the government‘s argument is based on its incorrect view that the PHAs’ claim “seeks larger, strings-attached Federal subsidies,” which is “inherently not a cognizable claim for money damages” but rather one for equitable relief. See Appellant‘s Br. 23-24; accord Appellant‘s Br. 28. That premise is wrong. The ACCs contractually obligate HUD to pay the PHAs their operating subsidy (or their prorated operating subsidy if insufficient funds are available). See J.A. 127 (incorporating by reference HUD regulations in title 24 of the Code of Federal Regulations); J.A. 128 (“HUD shall provide annual contributions to the [PHA] in accordance with all applicable statutes, executive orders, regulations, and this ACC.“); see also
Second, the government‘s reliance on Lummi is misplaced. In Lummi, we held that the Native American Housing Assistance and Self-Determination Act of 1996 (“NAHASDA“) was not a money-mandating statute because it did “not authorize a free and clear transfer of money.” Lummi, 870 F.3d at 1319. NAHASDA established an annual block grant program through which Indian tribes, like the Lummi Tribe, received direct funding from HUD to provide affordable housing to their members. Id. at 1315. NAHASDA bears some similarity to Section 9 of the Housing Act: (1) it requires HUD to make grants according to a multi-factored formula, (2) it specifies the activities on which grantee tribes may dispense their funds, and (3) it allows
The similarities between the two statutory schemes are irrelevant, however, to whether the Claims Court has jurisdiction over the PHAs’ breach of contract claim. Indeed, after we dismissed the Lummi Tribe‘s action for lack of subject matter jurisdiction, id. at 1320, we subsequently clarified that the Lummi Tribe‘s breach of contract claim was outside the scope of our prior mandate. See Lummi Tribe of the Lummi Reservation v. United States (Lummi II), 788 F. App‘x 717, 721 (Fed. Cir. 2019). We explained that the scope of our review in Lummi “was limited to Lummi‘s claim under NAHASDA” and that resolution of its breach of contract claim “was not necessary to our conclusion[] that NAHASDA is not a money-mandating statute.”5 Id. at 721-22. Given that our holding in Lummi did not extend to the Lummi Tribe‘s breach of contract claim, we see no reason to extend it to the PHAs’ claim here.
The government argues that there is no reason why the strings-attached nature of funds is a “paramount consideration” for statutes and yet “entirely irrelevant” for contracts “whose entire purpose is to apply that same non-money mandating statute.” Appellant‘s Br. 24. But as we have already said, with regard to the money-mandating requirement, the Supreme Court and this court have long distinguished between claims based on statutes and claims based on contracts. See Holmes, 657 F.3d at 1313-14 (discussing, e.g., Eastport Steamship Corp. v. United States, 372 F.2d 1002 (Ct. Cl. 1967)); see also Eastport, 372 F.2d at 1008 & n.7 (characterizing contract claims as falling under “another head of jurisdiction” from statutory claims). Further, the government glosses over the fact that contracts impose obligations on parties, for which damages are the default remedy upon breach. Cf. Winstar Corp., 518 U.S. at 885 (plurality opinion) (explaining that “damages are always the default remedy for breach of contract“). That contractual provisions either are required by or incorporate governing regulations does not make those obligations any less contractual in nature. See San Juan, 391 F.3d at 1360.
Moreover, in Lummi, we explained that any claim for relief under NAHASDA “would necessarily be styled” as a claim for “larger strings-attached NAHASDA grants—
including subsequent supervision and adjustment—and hence, for equitable relief.” 870 F.3d at 1319. By contrast, the PHAs’ complaint makes clear that they seek compensatory damages for HUD‘s breach of contract and not equitable relief in the form of an order that the 2012 funding be redistributed or increased. See J.A. 119-21 (¶¶ 71, 81-82, Prayer for Relief).
The government insists that the true nature of the PHAs’ claim is one that seeks larger, strings-attached operating subsidies. Indeed, the government urges that the “true object” of the PHAs’ claim is strings-attached operating subsidies. Appellant‘s Reply Br. 2, 14. We disagree. In Bowen v. Massachusetts, 487 U.S. 879 (1988), the Supreme Court distinguished between compensatory damages, which “are given to the plaintiff to substitute for a suffered loss,” and specific remedies, which “are not substitute remedies at all, but attempt to give the plaintiff the very thing to which he was entitled.” Id. at 895.
At bottom, the distinction between this case and Lummi is straightforward. The government may implement statutorily mandated subsidy programs without employing contracts as a vehicle for doing so. If it takes that route, the government would rarely subject itself to suit under the Tucker Act by a potential recipient of such subsidies. If it chooses to employ contracts to set the terms of and receive commitments from recipients with respect to such subsidies, depending upon the terms of the contract and the circumstances of non-payment, the government may find itself subject to suit in the Claims Court for damages relating to an alleged breach.
Third, the government‘s analogy to NCMS fails because this case is distinguishable. In NCMS, we reversed a district court order transferring the case to the Claims Court. 114 F.3d at 202. NCMS filed suit after Congress appropriated $40 million for NCMS in the Department of Defense Appropriations Act for Fiscal Year 1994 (“1994 Appropriations Act“), but the Air Force obligated only approximately $24 million of the appropriated funds in its Cooperative Agreement with NCMS. Id. at 197-98. The district court viewed the case as a contract claim against the government, even though three of the four pleaded counts were “plainly based” on the 1994 Appropriations Act and the remaining claim requested “specific performance of the Cooperative Agreement between NCMS and the Air Force, a remedy that the Court of Federal Claims is not empowered to grant.” Id.
We looked to the true nature of the claims asserted and determined that the transfer was improper. See id. at 202. As to NCMS‘s statutory claims, we explained that “NCMS is seeking funds to which it claims it is entitled under a statute,” and not “money in compensation for losses that it has suffered or will suffer as a result of the withholding of those funds.” See id. at 200 (analogizing to Bowen, 487 U.S. 879). Further, the 1994 Appropriations Act restricted NCMS‘s uses of appropriated funds, thus contemplating “a cooperative, ongoing relationship between NCMS and the Air Force.” Id. at 201. In light of these restrictions, we explained that, “even if NCMS is entitled to obtain access to the remaining [unobligated funds] on some terms,” it seemed reasonably clear that a simple money judgment would not be an appropriate remedy. Id. Like our holding in Lummi about the Lummi Tribe‘s statutory claim, our discussion of NCMS‘s statutory claims is irrelevant to the PHAs’ breach of contract claim.
As to NCMS‘s contract claim, we concluded that that the Claims Court could
The government argues that NCMS is analogous because, “in addition to making requests for equitable relief, ‘[s]ome portions of NCMS‘s complaint suggest that NCMS seeks a naked money judgment.‘” Appellant‘s Br. 32 (quoting NCMS, 114 F.3d at 201 (internal quotations omitted)). Not so. While we recognized that portions of NCMS‘s complaint suggested that NCMS sought a naked money judgment, we determined that NCMS could only obtain what it wanted via injunctive relief. NCMS, 114 F.3d at 201 (“Other portions of the complaint, however, make clear that NCMS anticipates the need for injunctive relief . . . .“). Here, nothing in the PHAs’ claim requires injunctive or equitable relief, remedies that the Claims Court generally lacks power to grant.
The government also argues that NCMS is analogous because the Cooperative Agreement in NCMS and the ACCs here “involve heavy use ‘restrictions’ and an ‘ongoing relationship’ with the Government.” Appellant‘s Br. 31. But our conclusion—that “[i]n light of the restrictions governing the manner in which money may be allocated to NCMS and spent, it thus seems reasonably clear that a simple money judgment issued by the Court of Federal Claims would not be an appropriate remedy, even if NCMS is entitled to obtain access to the remaining [unobligated funds] on some terms“—was limited to NCMS‘s statutory claims. See NCMS, 114 F.3d at 201 (emphasis added). As we explained, NCMS could only obtain the unobligated funds contractually by supplementing its existing Cooperative Agreement or creating a new one. See id. at 202. Although we observed that the Cooperative Agreement reflected the 1994 Appropriations Act‘s ongoing relationship between NCMS and the government, our analysis of the use restrictions and ongoing relationship did not extend to NCMS‘s contract claim because NCMS could not obtain the unobligated funds on any terms under its existing Cooperative Agreement. Again, the PHAs do not seek to expand or alter their current contractual rights under their ACCs.
We turn now to the government‘s two remaining arguments on jurisdiction. First, the government argues that only equitable relief would make the PHAs whole and not overcompensate them. Specifically, the government asserts that this court “would have to specify which use restrictions and Government rights would apply to any breach award in this case” so as “to give effect to the parties’ agreement, and to give HUD the benefit of its bargain.” Appellant‘s Br. 31. We do not agree that a money damages award would overcompensate the PHAs. The general rule is that damages for breach of contract shall place the wronged party in as good a position as it would have been had the breaching party fully performed its obligation. Mass. Bay Transp. Auth. v. United States, 129 F.3d 1226, 1232 (Fed. Cir. 1997). Here, had HUD performed its contractual
Second, the government argues that merely requesting money damages under a contract is not enough to establish Tucker Act jurisdiction. We agree. See, e.g., NCMS, 114 F.3d at 199; Katz v. Cisneros, 16 F.3d 1204, 1207 (Fed. Cir. 1994). But our holding is not based solely on the relief requested in the PHAs’ complaint. In addition to requesting
compensatory damages, the PHAs pleaded a non-frivolous claim based on a money-mandating source of law, their express contract with HUD. See Trauma Serv. Grp. v. United States, 104 F.3d 1321, 1325 (Fed. Cir. 1997) (holding an allegation that an express or implied-in-fact contract underlay the claim “suffices to confer subject matter jurisdiction in the Court of Federal Claims“). As explained above, these ACCs do not fall into any of the three categories of contracts that we have recognized as exempted from the presumption that damages are available upon breach of contract. Clearly, the ACCs can fairly be interpreted as contemplating monetary damages in the event of breach. Thus, we hold that the Claims Court has jurisdiction over the PHAs’ breach of contract claim.
C. Rule 12(b)(6)
To survive a motion to dismiss, a complaint must contain sufficient facts, accepted as true, to “state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is plausible on its face when the plaintiff‘s factual pleadings “allow[] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (quoting Twombly, 550 U.S. at 556).
Because the Claims Court viewed the government‘s Rule 12(b)(6) argument as essentially the same as its jurisdictional argument, it disposed of them together. Boaz, 141 Fed. Cl. at 79, 85.
The government argues that the PHAs failed to state a claim because they are not legally entitled to a naked money judgment “for all of the reasons as discussed in detail” in its jurisdictional arguments. Appellant‘s Br. 40-41. Specifically, the government argues that the ACCs only contemplate purely non-Tucker Act remedies for obtaining a withheld operating subsidy because an unrestricted damages award would overcompensate the PHAs.
A court‘s jurisdiction and a claim‘s merits are generally distinct inquiries. See Jan‘s Helicopter Serv., Inc. v. Fed. Aviation Admin., 525 F.3d 1299, 1306-07 (Fed. Cir. 2008) (explaining that the Supreme Court in White Mountain Apache Tribe “made clear that the merits of the claim
On the other hand, the merits inquiry considers whether the plaintiff has established all elements of its cause of action. Fisher, 402 F.3d at 1175. Therefore, “the consequence of a ruling by the court on the merits, that plaintiff‘s case does not fit within the scope of the source, is simply this: plaintiff loses on the merits for failing to state a claim on which relief can be granted.” Id. at 1175-76; cf. St. Bernard Par. Gov‘t v. United States, 916 F.3d 987, 991, 998 n.5 (Fed. Cir. 2019).8
Here, the government‘s argument that the ACCs only contemplate purely non-Tucker Act remedies is not pertinent to the merits issue of whether the PHAs have established all elements of their breach of contract claim. Rather, it restates the government‘s jurisdictional argument as to why the ACCs are not a money-mandating source. See Higbie, 778 F.3d at 993 (holding that, “if relief for breach of contract could be entirely non-monetary,” it is “proper for the court to require a demonstration that the agreements could fairly be interpreted as contemplating monetary damages in the event of breach“). The government has not otherwise attacked the merits of the PHAs’ claim—the existence of a contract, the terms thereof, or the failure of HUD to abide by the same. We therefore reject the government‘s argument as a basis to dismiss for failure to state a claim.
III. CONCLUSION
We have considered the government‘s remaining arguments and find them unpersuasive. For the reasons discussed above, we affirm the Claims Court‘s denial of the government‘s motion to dismiss for lack of jurisdiction and failure to state a claim.
AFFIRMED