Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca13-15-05074/USCOURTS-ca13-15-05074-0/pdf.json

Parties Involved:
Northrop Grumman Computing Systems, Inc.
Appellant
United States
Appellee

Document Text:

United States Court of Appeals 

for the Federal Circuit ______________________ 

NORTHROP GRUMMAN COMPUTING SYSTEMS, 

INC.,

Plaintiff-Appellant

v.

UNITED STATES,

Defendant-Appellee

______________________ 

2015-5074

______________________ 

Appeal from the United States Court of Federal 

Claims in No. 1:07-cv-00613-FMA, Senior Judge Francis 

M. Allegra.

______________________ 

Decided: May 24, 2016

______________________ 

DAVID C. AISENBERG, Looney Cohen Reagan & Aisenberg LLP, Boston, MA, argued for plaintiff-appellant.

MARTIN M. TOMLINSON, Commercial Litigation 

Branch, Civil Division, United States Department of 

Justice, Washington, DC, argued for defendant-appellee. 

Also represented by BENJAMIN C. MIZER, ROBERT E.

KIRSCHMAN, JR., MARTIN F. HOCKEY, JR. 

______________________ 

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2 NORTHROP GRUMMAN COMPUTING v. US

Before PROST, Chief Judge, REYNA and WALLACH, Circuit Judges.

REYNA, Circuit Judge. 

Northrop Grumman Computing Systems, Inc., 

(“Northrop”) appeals from summary judgment by the

United States Court of Federal Claims. Northrop Grumman Computing Sys., Inc. v. United States, 120 Fed. Cl. 

460, 466 (2015) (“Northrop Cl.”). The Court of Federal 

Claims determined that Northrop failed to show any 

harm resulting from its claim that the Government had 

breached the contract. We affirm the judgment of the 

Court of Federal Claims.

BACKGROUND

This is Northrop’s second appeal to this court in this 

case. The background of the prior actions has been thoroughly recounted by the Court of Federal Claims, 

Northrop Cl., 120 Fed. Cl. at 461–64, and by this court, 

Northrop Grumman Computing Sys., Inc. v. United 

States, 709 F.3d 1107, 1109–11 (Fed. Cir. 2013) 

(“Northrop Cir.”). The facts relevant to the limited issue 

on this appeal are as follows. 

Factual History

In July 2001, U.S. Immigration and Customs Enforcement (“ICE”) awarded Northrop a Delivery Order to 

supply and support network monitoring software produced by Oakley Networks (“Oakley”). The Delivery 

Order provided that Northrop would furnish the software 

and services via a lease for one base year and three option 

years. The agreed base-year price was $900,000, and the 

agreed price for each option year was $899,186. The 

Delivery Order represented a total value of $3,597,558, if 

the Government exercised all three option years. Approximately one month after the award, Northrop and ICE 

executed a modification of the Delivery Order requiring 

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NORTHROP GRUMMAN COMPUTING v. US 3

the Government to use its best efforts to secure funding

for the option years.

Without notice to the Government, Northrop entered 

into a private agreement with ESCgov, Inc. (“ESCgov”), 

an IT services company. Under the terms of the agreement, Northrop assigned all payments due under the 

Delivery Order to ESCgov. In exchange, ESCgov agreed 

to pay to Oakley and Northrop a total amount of 

$3,296,093. ESCgov paid $2,899,710 directly to Oakley 

for the software and paid the remainder to Northrop, 

$191,571 of which covered Northrop’s anticipated profit 

under the Delivery Order. Northrop Cl., 120 Fed. Cl. at 

463. The agreement also absolved Northrop from any 

liability to ESCgov for “failure of the Government to 

exercise a renewal option” so long as Northrop “use[d] its 

best efforts to obtain the maximum recovery from the 

Government.” Id. at 462.

 ESCgov subsequently assigned its rights under the 

Northrop–ESCgov agreement to Citizens Leasing Corp. 

(“Citizens”), a financial institution. None of the parties to 

the assignments notified the Government of the assignments as required by the Anti-Assignment Act, 31 U.S.C.

§ 3727(a)(2), (c)(3).1 

 

1 The Anti-Assignment Act, 31 U.S.C. § 3727, 

serves, in part, “to prevent possible multiple payment of 

claims, to make unnecessary the investigation of alleged 

assignments, and to enable the Government to deal only 

with the original claimant.” United States v. Aetna Cas. 

& Sur. Co., 338 U.S. 366, 371 (1949) (citing Spofford v. 

Kirk, 97 U.S. 484, 490 (1878)). It requires, among other 

things, that “the assignee files a written notice of the 

assignment and a copy of the assignment with the contracting official or the head of the agency, the surety on a 

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The Government paid Northrop the $900,000 fee for 

the base year, which it passed on to ESCgov. The Government, however, did not use the software in any of its 

investigations. On September 30, 2005, ICE sent 

Northrop formal notification of its decision not to exercise 

the lease’s first option year because it did not secure 

funding. Subsequently, the Government did not exercise 

any of the option years. 

Procedural History

On September 21, 2006, Northrop filed a claim with 

the contracting officer (“CO”) challenging the Government’s decision not to exercise the first option year on 

grounds that the Government breached the contract by 

failing to use its best effort to secure funding. The CO

declined the claim. 

On August 20, 2007, Northrop filed with the Court of 

Federal Claims a complaint appealing the CO’s adverse 

decision. During the proceedings, Northrop disclosed for 

the first time the ESCgov and Citizens agreements. 

Northrop Cl., 120 Fed. Cl. at 464. The disclosure led the 

Court of Federal Claims to conclude that Northrop was 

seeking damages based on a “pass-through” theory. 

Northrop Cir., 709 F.3d at 1110. The Court of Federal 

Claims dismissed the lawsuit on grounds that it lacked 

jurisdiction because Northrop failed to provide the CO 

with “adequate notice” of its claim by failing to disclose 

the agreements. Id. 

On August 23, 2011, Northrop appealed from the 

judgment of the Court of Federal Claims. Northrop 

argued that its claim was not a pass-through claim 

brought on behalf of the third parties, but rather a breach 

of contract claim brought on its own behalf. Id. at 1113. 

 

bond on the contract, and any disbursing official for the 

contract.” 31 U.S.C. § 3727(c)(3).

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We reversed the Court of Federal Claims’ judgment that 

it lacked jurisdiction, holding that Northrop’s claim before 

the CO satisfied the statutory requirements for a claim 

under the Contract Disputes Act. Id. at 1113. We remanded to the Court of Federal Claims with instructions 

that it review in the first instance the merits of 

Northrop’s breach of contract claim. Id. 

On remand, the Government moved for summary 

judgment on grounds that Northrop failed to show damages. The late Judge Francis M. Allegra agreed and 

found that Northrop “is unable to identify any way that it, 

as opposed to ESCgov or Citizens, was harmed by defendant’s actions.” Northrop Cl., 120 Fed. Cl. at 466. The 

Court of Federal Claims entered summary judgment in 

favor of the Government and dismissed the complaint on 

the basis “that defendant has demonstrated that plaintiff 

is not entitled to any damages under the Delivery Order 

in question or otherwise.” Id. Northrop appeals. We 

have jurisdiction under 28 U.S.C. § 1295(a)(3).

DISCUSSION 

Standard of Review

We review a grant of summary judgment by the Court 

of Federal Claims de novo, drawing all factual inferences 

in favor of the nonmovant. Anderson v. United States, 344 

F.3d 1343, 1349 (Fed. Cir. 2003). Summary judgment is 

appropriate when “there is no genuine dispute as to any 

material fact and the movant is entitled to judgment as a 

matter of law.” RCFC 56(a).

Analysis

Northrop argues that the Court of Federal Claims 

erred because it was entitled to recover damages despite 

having assigned its rights under the contract. In the 

alternative, Northrop urges that the Government should 

be compelled to make the payments specified under the 

contract. Northrop believes that the Court of Federal 

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6 NORTHROP GRUMMAN COMPUTING v. US

Claims improperly treats the payments Northrop received 

under the assignment as a substitute for the payments 

that the Government agreed to make to it under the 

Delivery Order. Northrop asserts that the Government 

should not be allowed to assert the ECSgov and Citizens 

agreements because it was not in privity to those agreements and the decision results in a windfall to the Government. Northrop argues that the Court of Federal 

Claims’ decision is inconsistent with the statutory scheme 

and this court’s prior decision remanding the case for 

merits consideration because it deprives Northrop of an 

opportunity to show breach and recover the payments due 

under the contract. 

It is fundamental in contract law that in order to recover on a breach of contract claim, a plaintiff must prove 

damages—that it has been harmed. Restatement (Second) of Contracts § 346 (1981) (“The injured party has a 

right to damages for any breach by a party against whom

the contract is enforceable unless the claim for damages 

has been suspended or discharged.” (emphasis added)).2 

Damages must be particular to the plaintiff. Id. A plaintiff fails to meet this burden upon proof of damages to 

third parties, but not to its own person. Severin v. United 

States, 99 Ct. Cl. 435, 443 (1943) (“Plaintiffs therefore had 

the burden of proving, not that someone suffered actual 

damages from the defendant’s breach of contract, but that 

they, plaintiffs, suffered actual damages.”).

 

2 For the first time at oral argument, Northrop 

raised the prospect of nominal damages. We decline to 

remand to determine if nominal damages would be appropriate. Restatement (Second) of Contracts § 346 cmt. b 

(“Unless a significant right is involved, a court will not 

reverse and remand a case for a new trial if only nominal 

damages could result.”). 

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Northrop has not met its burden of establishing damages. The undisputed facts show that Northrop has 

suffered no harm. This harm can be expectancy damages, 

measured relative to expected profits; restitution damages, measured relative to a plaintiff’s position when the 

contract was signed; or reliance damages, as a sum of 

damages sustained as a result of a breach. Glendale Fed. 

Bank, FSB v. United States, 239 F.3d 1374, 1380–82 (Fed. 

Cir. 2001). Here, for example, Northrop offers no proof 

that the Government’s decision not to exercise the option 

years caused it harm by placing it in a financially worse 

position. 

To the contrary, the undisputed facts are that 

Northrop’s financial position is equal to what it expected 

to profit had the Government exercised all the option 

years. The evidence shows that Northrop received 

$191,571 in payment, an amount that represented the full 

extent of its anticipated profit upon assigning the Delivery Order. Northrop offered no proof that it expended 

resources or incurred any liabilities that cut into its 

anticipated profit. Northrop is in at least as good, if not 

better, a position as it expected when it assigned the 

Delivery Order payments, and it has not shown any 

particular harm to itself flowing from the alleged breach. 

See Glendale Fed. Bank, 239 F.3d at 1380–82.3 Northrop 

had its full self-measure of profit and it stood neither to 

gain nor to lose whether or not the Government exercised 

the option years. As the Court of Federal Claims correctly 

noted, “Northrop reaped the benefit of the bargain it 

 

3 At most, Northrop’s potential basis for damages is 

a pass-through claim on behalf of ESCgov and Citizens. 

But Northrop denies that it is bringing a pass-through 

claim. Northrop’s Opening Br. 27; Northrop’s Reply Br. 5; 

see also Northrop Cir., 709 F.3d at 1113.

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8 NORTHROP GRUMMAN COMPUTING v. US

negotiated—it is entitled to nothing more from defendant.” Northrop Cl., 120 Fed. Cl. at 466. 

We disagree with Northrop that it was improper for 

the Court of Federal Claims to consider the payment 

made to Northrop under the ESCgov agreement in determining whether Northrop was harmed. Contract damages take into account both a party’s losses and the losses 

that a party avoided. Restatement (Second) of Contracts 

§ 347 (1981); see also Severin, 99 Ct. Cl. at 443. The 

Court of Federal Claims was correct to take into account 

Northrop’s profits from the assignment of the Delivery 

Order in determining that it had not been harmed by an 

alleged breach of that contract. 

We also disagree with Northrop that this result is inconsistent with the precedents cited in our Northrop Cir.

decision. In Beaconwear Clothing Co. v. United States, we 

addressed a pass-through claim brought by a nominal 

plaintiff on behalf of its subcontractor. 355 F.2d 583 (Ct. 

Cl. 1966). But unlike this case, the plaintiff requested 

and received “permission to subcontract the entire contract” to the subcontractor. Id. at 585. Northrop, in 

contrast, both disclaimed pass-through theories of recovery and failed to obtain permission from the Government 

before assigning the Delivery Order. In Colonial Navigation Co. v. United States, a contractor sold a boat to a 

third party. 149 Ct. Cl. 242, 245 (1960). The boat was 

subject to a loan from the Government when it was sold, 

which the Government had agreed to forgive. Id. The 

Colonial court held that the contractor could sue to recover based on the Government’s breach of a promise to 

forgive that debt because the contractor showed that it 

received less in the third-party sale than it otherwise 

would have, i.e., the contractor proved it was harmed. Id. 

at 247. Northrop, in contrast, has not shown it has suffered any harm. 

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The judgment of the Court of Federal Claims is affirmed in all respects.

AFFIRMED

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