MEMORANDUM OPINION & ORDER DENYING DEFENDANT’S MOTION FOR PARTIAL DISMISSAL FOR LACK OF JURISDICTION, GRANTING PLAINTIFF’S MOTION FOR JUDGMENT ON THE PLEADINGS, AND DENYING DEFENDANT’S MOTION FOR PARTIAL SUMMARY JUDGMENT
Before the court are:
• “Defendant Renda Marine, Inc.’s Motion for Partial Dismissal for Lack of Subject Matter Jurisdiction” (Dkt. 14.);
• “Plaintiff United States’ Motion for Judgment on the Pleadings” (Dkt. 15.); and
• “Defendant Renda Marine, Inc.’s Motion for Partial Summary Judgment” (Dkt. 16.).
Having considered the parties’ motions, the responsive briefing, and the relevant legal principals, “Defendant Renda Marine, Inc.’s Motion for Partial Dismissal for Lack of Subject Matter Jurisdiction” (Dkt. 14.) is DENIED, “Plaintiff United States’ Motion for Judgment on the Pleadings” (Dkt. 15.) is GRANTED, and “Defendant Renda Marine, Inc.’s Motion for Partial Summary Judgment” (Dkt. 16.) is DENIED.
I. BACKGROUND
This is a government contract case. Renda Marine, Inc. (“Renda”) is a Texas corporation located in Roanoke, Texas. In October 1998, the Army Corps of Engineers (“the Corps”) entered into a contract with Renda to dredge a reach of the Houston Ship Channel known as the Upper Bayou and to construct containment levees and other structures at the Lost Lake Placement Area, a disposal facility for dredge material (“the Upper Bayou Contract”). During performance of the Upper Bayou Contract, Renda experienced difficulties with its dredging and construction work. According to Renda, it encountered unexpected site conditions that made completion of the work at the original contract price impossible. Because of these difficulties, Renda sought additional compensation from the Corps to complete the work. Renda and the Corps agreed on an amount
On November 26, 2002, while Renda’s suit was pending before the CFC, the contracting officer issued a final decision under the contract asserting six separate government claims against Renda. The total amount of these government claims was $11,860,016. Under the CDA, Renda had 90 days to appeal this decision to the Armed Services Board of Contract Appeals or twelve months to initiate an action in the CFC. Renda did not pursue either course. Instead, on July 1, 2004, Renda sought leave to amend its complaint in the ongoing CFC litigation to challenge the contracting officer’s decision. The CFC denied Renda’s motion for leave to amend and the Federal Circuit affirmed.
Renda Marine, Inc. v. United States,
The United States filed this lawsuit on behalf of the Corps to enforce the decision of the CFC. In Count I, the United States alleges that Renda owes the Corps $11,860,016 relating to the Upper Bayou Contract. According to Plaintiff, this government claim was resolved in a final decision of a contracting officer and determined to be final and conclusive by the CFC. In Count II, the United States seeks repayment of $3,083,833 that the Corps paid Renda in excess of the original contract price on the Upper Bayou Contract. According to the United States, the CFC determined Renda was not entitled to this amount. Although Renda admits to the contract disputes alleged by the United States, it denies that the United States has enforceable judgments against it.
On September 30, 2009, Defendant filed a motion for partial dismissal (Dkt. 14.), arguing this court lacks subject matter jurisdiction over Count II of the Complaint. Then on October 2, 2009, Plaintiff filed a motion for judgment on the pleadings (Dkt. 15.) and Defendant filed a motion for partial summary judgment (Dkt. 16.). In its motion for judgment on the pleadings, Plaintiff seeks entry of judgment on Counts I and II of its Complaint. According to Plaintiff, Defendant’s Answer does not state any defenses that bar entry of judgment for the United States. In its motion for partial summary judgment, however, Defendant argues that the statute of limitations bars Plaintiffs Count I claims as a matter of law.
II. DEFENDANT’S MOTION FOR PARTIAL DISMISSAL FOR LACK OF SUBJECT MATTER JURISDICTION
In its motion for partial dismissal and its response to Plaintiffs motion for judgment on the pleadings, Defendant argues this court lacks subject matter jurisdiction to consider Count II because Plaintiffs claim for $3,083,833 is an unresolved contract dispute governed by the procedures set forth in the CDA. According to Defendant, the lawsuit in the CFC involved Renda’s claim for $906,364 in additional payment, not a counterclaim by the United States for $3,083,833. (Def.’s Mot. to Dismiss at 8.) Defendant argues that because the United States’ claim for $3,083,833 has not been the subject of a contracting officer’s decision and was not adjudicated in the CFC, this court lacks jurisdiction to con
Count II relies on the CFC’s decision that Renda was not entitled to that amount. We are asking this Court to resolve the United States’ claim that Renda was unjustly enriched by the government’s payment had and received. But we are not asking this Court to resolve a government contract dispute that requires a CFC decision to ensure national uniformity in government contract law.
(Pl.’s Resp. to Def.’s Mot. to Dismiss at 6-7 (quotation omitted).) Therefore, according to Plaintiff, Count II is within the jurisdiction of this court because the CFC determined Renda was not entitled to the $3,083,833 payment.
A. Standard of Review
A federal court’s jurisdiction is limited and only extends to cases “arising under the Constitution, laws, or treaties of the United States,” or in cases where the amount in controversy exceeds $75,000. 28 U.S.C. § 1331, 1332. A challenge to subject matter jurisdiction “may be raised by a party, or by a court on its own initiative, at any stage in the litigation, even after trial and the entry of judgment.” Arbaugh
v. Y & H Corp.,
As a general rule, federal district courts have original jurisdiction over “all civil actions, suits or proceedings commenced by the United States .... ” 28 U.S.C. § 1345. However, the Contract Disputes Act of 1978 (“CDA”) was enacted to narrow that jurisdiction in lawsuits between federal government contractors and the United States. See 41 U.S.C. § 601, et seq. The CDA applies to any express or implied contract entered into by an executive agency for: “(1) the procurement of property, other than real property in being; (2) the procurement of services; (3) the procurement of construction, alteration, repair or maintenance of real property; or, (4) the disposal of personal property.” Id. at § 602(a)(l)-(4). Under the framework created by the CDA, all disputes over government contracts are considered first by a contracting officer:
[a]ll claims by a contractor against the government relating to a contract shall be in writing and shall be submitted to the contracting officer for a decision. All claims by the government against a contractor relating to a contract shall be the subject of a decision by the contracting officer.
Id.
at § 605(a). The contracting officer’s decision may be appealed through an agency board of contract appeals or by filing suit in the CFC.
Id.
at § 607, 609. The effect of the CDA, therefore, is to divest district courts of jurisdiction over contract disputes between the United States and federal contractors. However, nothing in the statute prevents a district court from assessing “the finality and unreviewability
B. ANALYSIS
In the present case, resolution of subject matter jurisdiction requires the court to consider the meaning and scope of the CFC’s decision. The $3,083,833 Plaintiff seeks in Count II relates to what is known as the “Flare Area”
1
claim. As Judge Hewitt explained in the CFC opinion, Renda experienced difficulty dredging the Flare Area portion of the channel because it encountered stiff clays when it had anticipated dredging soft clays.
Renda,
the contracting officer’s decision to modify the contract and ultimately award plaintiff $3,083,833, for incurring a changed condition from that shown in the contract is not final and [ ] plaintiff was required to litigate entitlement to the entire equitable adjustment amount claimed, not just the difference between the amount Renda claimed and what it was paid.
Id. at 690 (quotations and citations omitted). As the court explained, it’s conclusion that Renda was not entitled to its claims was “particularly harsh in this case because plaintiff received several equitable adjustments during contract performance to which, in the court’s view, plaintiff was not entitled under the law governing the proof of Type I differing site conditions and the evidence adduced at trial.” Id. at 721. Thus, in deciding Renda was not entitled to its claim for $906,364, Judge Hewitt also determined that Renda was not entitled to the entire equitable adjustment allowed by the contracting officer in the contract modification. Judge Hewitt’s holding is unambiguous: Renda was not entitled to its claim for $906,364 or the $3,083,833 it received in the contract modification. Therefore, the only issue now before the court is whether the CDA requires the United States file its own administrative claim in order to recover the overpayment. The court finds that it does not.
The CDA does not require the government to file an administrative claim
So the contractor must submit a claim, but when the government seeks a recovery it is enough that the issue “shall be the subject of a decision by the contracting officer.”
The difference in language is not hard to appreciate. The contractor files a claim, which leads to a “decision”; if that “decision” is in the government’s favor, no further claim is required ... Once an administrative decision has been made, and the parties ask a court for review, it matters not which party initiated the administrative proceeding.
Edmier,
Although the Seventh Circuit’s review involved a collection action to enforce a decision of the Armed Services Board of Contract Appeals, the reasoning in
Edmier
can be applied with equal force in the present case.
2
Here, Renda initiated a claim for $4,691,688 against the United States. This claim was subject to a decision by a contracting officer, who issued a unilateral contract modification. Under the unilateral contract modification the Corps paid Renda $3,083,833. Then Renda filed suit in the CFC to obtain an additional $906,364. The CFC considered the entire amount awarded in the Flare Area contract modification and determined that Renda was not entitled to the additional $906,364 it sought or the $3,083,833 it had already received.
Renda,
Defendant cites several cases to support its position that the United States must file an independent claim for repayment, however, none of these cases are persuasive. In
United States v. J & E Salvage Company,
for instance, the issue was not whether the United States must file an additional claim to recoup the property mistakenly transferred in the contract for sale, but that the United States had attempted to completely circumvent the procedures of the CDA by recasting contract claims in tort language.
Foley Company v. United States,
also cited by Defendant, is similarly off point. In
Foley,
the CFC held that it did not have jurisdiction over the government’s counterclaims and defenses, based on changes and differing site conditions clauses in the contract, because the claim had not been the subject of a decision by a contracting officer.
The only case cited by Defendant that strikes at the heart of the issue before the court is
Wilner v. United States,
C. Conclusion
The CDA does not prevent district courts from enforcing judgments in contract disputes between federal contractors and the United States. Because the CFC already considered the merits of the United States’ claim for $3,083,833, this court has subject matter jurisdiction over Count II. Accordingly, “Defendant Renda Marine, Inc.’s Motion for Partial Dismissal for Lack of Subject Matter Jurisdiction” (Dkt. 14.) is DENIED.
Plaintiffs motion for judgment on the pleadings (Dkt. 15.) and Defendant’s motion for partial summary judgment (Dkt. 16.) present overlapping issues of law and fact. For ease of analysis, the court’s dispositions of these motions is consolidated. The parties’ contentions are discussed according to the portion of Plaintiffs Complaint to which they relate.
A. Legal Standards
1. Judgment on the Pleadings
Under Federal Rule of Civil Procedure 12(c), any party may move for judgment on the pleadings “[a]fter the pleadings are closed — but early enough not to delay trial.” Fed. R. Crv. P. 12(c). “A motion brought pursuant to Fed. R.Civ.P. 12(c) is designed to dispose of cases where the material facts are not in dispute and a judgment on the merits can be rendered by looking to the substance of the pleadings and any judicially noticed facts.”
Hebert Abstract Co., Inc. v. Touchstone Props., Ltd.,
pleadings, Plaintiffs motion must be treated as a motion for summary judgment.
2. Summary Judgment
Summary judgment is proper “if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c);
Celotex Corp. v. Catrett,
In ruling on a motion for summary judgment, the court must not weigh the evidence and determine the truth of the matter. The only inquiry necessary “is the threshold inquiry of determining whether there is a need for trial — whether, in other words, there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party.”
Anderson v. Liberty Lobby, Inc.,
1. Count I
In its motion for judgment on the pleadings, the United States argues it is entitled to judgment for $11,860,016, because the CFC held that the contracting officer’s decision concerning the Corps’ claims against Renda was final and conclusive. The United States argues that judgment on the pleadings is appropriate because Renda failed to plead facts sufficient to support any of its affirmative defenses. In its motion for partial summary judgment and its response to Plaintiffs motion for judgment on the pleadings, Defendant argues Plaintiffs Count I claims are barred by the statute of limitations. According to Defendant, it does not contend that Plaintiff was required to file a counterclaim with respect to Count I. (Defi’s Resp. to Pl.’s Mot. for J. on the Pleadings at 4.) Finally, Defendant states that its “remaining defenses, whether presented as set-off, estoppel, accord and satisfaction or otherwise, relate to the $259,840 owed to Renda and withheld by the Government, as indicated in the November 26, 2002 decision, but not yet applied to any amount allegedly owed Renda.” (Id. at 5.) Therefore, this court need only consider two issues with respect to Count I: (1) whether Plaintiffs claim is barred by the statute of limitations; and (2) if Plaintiffs claim is not barred whether it should be reduced to the extent of $259,840.85.
a. Statute of Limitations
The statute of limitations applicable government contract actions is found in 28 U.S.C. § 2415(a). Section 2415(a) provides alternative limitations periods for government actions founded in contract. Under § 2415(a), the government must file suit either “within six years after the right of action accrues or within one year after final decisions have been rendered in applicable administrative proceedings required by contract or by law” 28 U.S.C. § 2415(a) (emphasis added). The plain language of the statute instructs courts to apply “whichever [limitations period] is later.” Id.
In the present case, there is no dispute that § 2415(a) provides the applicable limitations period. The parties disagree, however, about which of § 2415(a)’s provisions should apply — the six year period or one year savings clause. In addition, the parties disagree about when the statute began to run under each provision. Because the court may apply whichever limitations period is later, the court will consider each in turn.
i. Six Year Limitation Period
Defendant argues the government’s cause of action is untimely under § 2415(a)’s six year limitation period because it accrued when the contract was breached (on September 18, 2001 at the latest). Plaintiff counters that its claims founded in contract could not accrue until a contracting officer issued a final decision (on November 26, 2002).
Although a contract claim generally accrues at the time of breach, the present case is unique because it is a suit to enforce the decision of a contracting officer, not a suit based on the merits of the contract dispute. Therefore, arguably, “[a]n action to enforce a contracting officer’s decision [] cannot accrue until the decision is made because suit cannot commence before that time.”
United States v. Suntip,
[T]ime does not begin to run for an enforcement action until the contracting officer renders his or her decision. Under the Contract Disputes Act, the government cannot take legal action on its claim until it first makes it “the subjectof a decision by the contracting officer.” Time cannot run against the government until it is procedurally possible for it to sue.
Id. (citations omitted). If this reasoning is applied in the present case, the government’s Count I claims accrued on November 26, 2002, when the contracting officer rendered a decision demanding $11.8 million from Renda. Therefore, if Suntip is applied, the government’s action is timely under § 2415(a), because it was filed on November 24, 2008, within six years of the contracting officer’s final decision.
Defendant suggests the Sixth Circuit’s holding in
Suntip
is invalidated by
United States v. American States Insurance Company,
ii. One Year “Savings Clause”
Defendant contends that even if the one year savings clause is applied, Plaintiffs action is untimely because the “applicable administrative proceedings” ended when the contracting officer issued his final decision on November 26, 2002. Plaintiff argues the administrative proceedings were not complete until December 11, 2007, when the Federal Circuit affirmed the CFC’s decision denying Renda leave to amend its complaint to challenge the contracting officer’s final decision. The court agrees.
Under § 2415(a) an appeal to the CFC constitutes “an applicable administrative proceeding” that triggers the one year savings clause.
Suntip,
proceedings in the Court of Federal Claims can be very lengthy and are not within the control of the government. The decision of that court can change or reverse the contracting officer’s decision. If the alternative clause of section 2415 is not applied to extend limitations, it is possible that the government’s time to bring an enforcement action will expire before it has a final decision to enforce.
Id. This holding is consistent with § 2415’s legislative history, which explains that the one year provision is intended to toll the statute of limitations during mandatory administrative proceedings, including “appeals” related to government contracts:
[The one year] provision, which has the effect of tolling the running of the statute of limitations during mandatory administrative proceedings, is necessary because of the great number and variety of such proceedings made possible by current statutes. An administrative proceeding ordinarily consumes a considerable period of time and, as has been noted, the bill would permit the Government a year after the final administrative decision in which to present its case for judicial determination. An example of such an administrative proceeding are those which involve appeals under the “disputes” clause of Government contracts.
S.Rep. No. 89-1328, at 2504 (1966),
as reprinted in
1966 U.S.C.C.A.N. 2502 (emphasis added);
see also American States,
In the present case, the same is true. This court would not have had jurisdiction to consider Plaintiffs claims against Defendant until Renda’s appeal of the CFC’s decision denying Renda leave to amend its complaint was finalized. The decision of the Federal Circuit could have changed or reversed the CFC’s decision and thereby allowed Renda the opportunity to litigate the merits of the contracting officer’s decision. Accordingly, it was not possible for the government to enforce the contracting officer’s decision until it was clear Renda would be barred from challenging it. The United States filed the present action on November 24, 2008, within one year of the Federal Circuit’s December 11, 2007 decision. Therefore the government’s action was timely under § 2415(a)’s one year savings clause.
b. Setoff (Offset)
Even if Plaintiffs action is timely under § 2415(a), Defendant argues Plaintiffs claim is barred to the extent of $259,840.85 which it claims the Corps withheld from “amounts earned by and owed to Renda as a setoff for amounts the Corps stated were owed to it.” (Def.’s Mot. Summ. J. at 26.) Plaintiff contends this defense should be rejected because there has been no “new agreement” that could constitute an accord and satisfaction. Additionally, Plaintiff argues Defendant cannot challenge the merits of the contracting officer’s decision because this court lacks jurisdiction to consider such claims. (PL’s Resp. to Def.’s Mot. Summ. J. at 23.)
A claim for offset in federal court is an affirmative defense.
Giles v. Gen. Elec. Co.,
2. Count II
In its motion for judgment on the pleadings, Plaintiff seeks entry of judgment on Count II of its Complaint because it alleges the CFC’s decision binds Renda to pay the $3.1 million overpaid by the Corps. In its defense, Defendant reasserts the arguments made in its motion for partial dismissal for lack of subject matter jurisdiction. According to Defendant, this court lacks jurisdiction to consider Plaintiffs Count II claim because Plaintiff has not asserted its claims through the procedures required by the CDA. As discussed above, however, the government was not required to assert a separate claim for $3.1 million. The CFC considered Renda’s entire Flare Area claim and Renda was not entitled to either the amount paid or the additional amount sought. The litigation in the CFC satisfied the requirements of the CDA and this court has subject matter jurisdiction to consider Count II.
Defendant also argues that Plaintiffs Count II claims should be barred by the statute of limitations because “[i]f the Government asserts its $3,083,833 overpayment claim through the proper channel of administrative proceedings, the claim will be barred by the CDA’s statute of limitations.” (Def.’s Resp. to Plaintiffs Mot. for Judgment on Pleadings at 28.) Because this court has already determined an additional claim for the amount overpaid was not necessary, it need not consider what would happen if Plaintiff were required to assert claims through the CDA’s administrative procedures. Defendant’s CDA statute of limitations argument is, therefore, inapposite.
C. Conclusion
For the reasons set out above, “Plaintiff United States’ Motion for Judgment on the Pleadings” (Dkt. 15.) is GRANTED, and “Defendant Renda Marine, Inc.’s Motion for Partial Summary Judgment” (Dkt. 16.) is DENIED.
IV. CONCLUSION
In this action, the United States seeks the entry of judgment on two claims asserted against Renda Marine, Inc. Because Plaintiff has already satisfied the administrative requirements of the CDA and timely filed suit in this court, there are no fact issues regarding Plaintiffs claims. Accordingly, “Defendant Renda Marine, Inc.’s Motion for Partial Dismissal for Lack of Subject Matter Jurisdiction” (Dkt. 14) is DENIED, “Plaintiff United States’ Motion for Judgment on the Pleadings” (Dkt. 15) is GRANTED, and “Defendant Renda Marine, Inc.’s Motion for Partial Summary Judgment” (Dkt. 16) is DENIED.
IT IS SO ORDERED.
Notes
. The "Flare Area” is a portion of the Houston Ship Channel where the "width of the Channel flares out ... to allow ships easy passage.”
Renda,
. The CDA places the authority of the Armed Services Board on par with that of the CFC: "the agency board is authorized to grant any relief that would be available to a litigant asserting a contract claim in the United States Court of Federal Claims." 42 U.S.C. § 607(d). As the Federal Circuit has explained, this means the Armed Services Board, like the CFC, "can, with respect to a contracting officer’s decision that has been appealed to it, reduce as well as increase the award made by that contracting officer.”
Assurance Co. v. United States,
. On appeal, the Federal Circuit found that the CFC erred because it did not conduct a proper de novo review of the contracting officer's decision.
Wilner v. United States,