## United States Court of Appeals for the Federal Circuit

2006-5060

AVTEL SERVICES, INC., Plaintiff-Appellant,

v.

UNITED STATES, Defendant-Appellee,
and

KING AEROSPACE, INC., Defendant-Appellee.

Howell Roger Riggs , Dick, Riggs, Miller & Stem, LLP , of Huntsville, Alabama, argued for plaintiff-appellant. With him on the brief were David H. Stem, Jr. , and Patrick O. Miller . Of counsel was Timothy Paul Pittman

. Elizabeth A. Holt , Trial Attorney, Commercial Liti gation Branch, Civil Division, United States Department of Ju stice, of Washington, DC, argued for defendant-appellee, United States. With her on the brief was Peter D. Keisler , Assistant Attorney General, and Todd M. Hughes , Assistant Director. Marshall J. Doke, Jr. , Gardere Wynne Sewell LLP, of Dallas, Texas, argued for defendant-appellee, King Aerospace, Inc. With him on the brief was Stacy R. Obenhaus

. Appealed from: United States Court of Federal Claims Judge Marian Blank Horn

.

## United States Court of Appeals for the Federal Circuit

2006-5060

AVTEL SERVICES, INC., Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee, and KING AEROSPACE, INC., Defendant-Appellee. Before NEWMAN, RADER, and PROST, Circuit Judges

. Dissenting opinion filed by Circuit Judge NEWMAN. PER CURIAM. ORDER Avtel Services, Inc. (Avtel) seeks a resolicit ation or reevaluation of a contract that was awarded to King Aerospace, Inc. by the United States. This court only possesses jurisdiction over Avtel's appeal if it can be aw arded the relief it seeks. Avtel has made a general assignment to another party to liquidat e its assets and distribute the proceeds to creditors and admits that it does not hav e the resources necessary to perform the
contract.

2006-5060Accordingly, IT IS ORDERED THAT: This appeal is dismissed for want of jurisdiction based on Avtel's bankruptcy
status. FOR THE COURT

_ August 21 2007

________ _ s/Jan Horbaly

_________________ Date Jan Horbaly Clerk

## United States Court of Appeals for the Federal Circuit

2006-5060

AVTEL SERVICES, INC., Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee, and KING AEROSPACE, INC., Defendant-Appellee.

NEWMAN, Circuit Judge , dissenting.

I respectfully dissent. Avtel's insolvency di d not extinguish its existing claims upon the Assignment for the Benefit of Creditors under California law. The claims of an insolvent entity do not disappear, whet her the insolvent entity is seeking to reorganize or to continue or to dissolve. To the contrary, the claims su rvive for the benefit of the insolvent entity and its successors and creditors. See , e.g. , Segal v. Rochelle , 382 U.S. 375, 380 (1966) (the bankruptcy filing did not extinguish any pre-petition cause of acti on). The "anti-assignment" stricture of government c ontracting law does not apply to such assignments. See United States v. Shannon , 342 U.S. 288, 292 (1952) ("In the ninet y-nine-year history of the AntiAssignment Act, this Court has recognized as ex ceptions to the broad sweep of the statute2006-5060 2 two types of voluntary assignments (aside fr om voluntary assignments made after a claim has been allowed): transfers by will, . . . and general assignments for the benefit of creditors.") (citations omitted). From the panel majority's holding that this Assignment "moots" the claim and this appeal, I must, respectfully, dissent. This bid protest claim was filed by Avtel afte r it lost the bid for renewal of a contract of which it was the incumbent contractor. Avtel asserts that this procurement was accompanied by various violations of t he Procurement Integr ity Act, 41 U.S.C. ' 423(b) ("Prohibition on obtaining procurem ent information"). Exposure of violations, instituted by persons with an interest in the procurement, serves a principle purpose of 31 U.S.C. ' 3551, the Competition in Contracting Act (prote st may be "based in whole or in part on improprieties concerning the awar d of the contract"). While the case was pending in the Court of Federal Claims Avtel entered into an Assignment for the Benefit of Creditors under California law and suspended its activities, in accordance with Califor nia Revenue and Tax Code ' 23301. Avtel has since obtained a Certificat e of Revival restoring it to active corporate status. The Assignment did not exti nguish the claims that Avtel possessed; to the contrary, the continuation and prosecution of existing claims is contemplated by the California statute. With all respect to my colleagues on this panel, they are incorrect in holding that the Assignment rendered "moot" Avtel's pending bid protest. The Court of Federal Claims and the district courts have jurisdicti on of objections by an interested party "to a solicitation by a Federal agency for bids or proposals for a proposed contract or to a proposed award or the award of a contra ct or any alleged violation of statute or r egulation in connection with a procurement or proposed procurement." 28 U.S.C. ' 1491(b). An "interested party" in cludes an "actual or prospective2006-5060 3 bidder or offeror whose direct economic intere st would be affected by the award of the contract or by failure to award the contract." E.g. , Am. Fed. of Gov't Employees v. United States , 258 F.3d 1294, 1302 (Fed. Cir. 2001) (quoting 31 U.S.C. ' 3551(2)). Avtel was an actual bidder, and the adverse effe ct on its direct economic interest is made crystal clear by its ensuing insolvency. The government does not disput e that Avtel was prejudiced by loss of the contract; nor, however, does the government mention the alleged improprieties. Instead, the government argues that "the case is moot" because "there is no re asonable expectation the violations it alleged will recur, since Avtel [i s going out of business]." Gov't Supplemental Brief at 9 n.4. My colleagues agree, and deny Avtel the opportunity to press its claim on the ground that Avtel c ould not now perform the contract. Thus the charges of wrongdoing in the award of this contract are insulated from scrutiny, and access to remedy denied, on the ground that the injury to Avtel rendered Avte l incapable of complaining about it. That is not the law. An entity with a claim against the United States does not lose the ri ght to press that claim if insolvency intervenes. When Avtel f iled the bid protest, it requested that the contract be awarded to it or reprocured, a remedy that would have been available had the agency acted favorably. My colleagues' ruling that Avtel cannot now perform the contract, a position that Avtel disputes , has no relation to whether Avtel could have performed the contract at the time it lost the bid. Contrary to the stat ement in the Court's Order, Avtel states that it can indeed perform the contract, as it did before its renewal bid was rejected. Avtel's former Chief Executive Officer Telf ord Allen, III, states in his February 2007 declaration: "In the event that an award of the ARL contract is directed to Avtel, the2006-5060 4 stockholders and management plan to . . . have the assets of Avtel restored to the corporate entity [and] Avtel, upon reassignment of assets . . . can meet all of the responsibility criteria estab lished by FAR 9.103, FAR 9.104, et. seq. " Indeed, performance capability is not disputed. The holding that no protest can be made is an incorrect implementation of the bid protest statute, which is designed to expose improper bidding practices in government procurem ent and to protect the victims of such improprieties. Nor is it a correct implementation of the insolvency statutes, w hose purpose is to protect both the insolvent entity and its creditors. Precedent illustrates that in successful bid pr otests the contract is often well into performance by the wrongful awardee by the ti me the protest has been finally resolved in court. The issue is not Avtel's ability to per form a contract whose time of performance has past, but whether Avtel is entit led to relief if its bid protest arguments are correct. See 28 U.S.C. ' 1491(b)(2): (2) To afford relief in su ch an action, the courts may award any relief that the court considers proper, including declarato ry and injunctive relief except that any monetary relief shall be limited to bid preparation and proposal costs. In filing its complaints starting in 2004, Av tel asked that the bi d be awarded to it or subjected to reprocurement. This does not moot any relie f "that the court considers proper," an issue not explored. It has not been explored whether "[t]he Government has prematurely predicted that Avte l is without the ability to obtai n the necessary resources to accept an award of the contract in this case ." Avtel's supplementar y filing, February 20, 2007. In Bender Shipbuilding & Repair Co. v. United States , 297 F.3d 1358, 1362 (Fed. Cir. 2002) the court sustained the award of a contract to a bi dder that was in Chapter 11 Bankruptcy at the time of the award.2006-5060 5 "The burden of demonstrating m ootness 'is a heavy one.'" County of Los Angeles v. Davis , 440 U.S. 675, 631 (1978) (quoting United States v. W.T. Grant Co. , 345 U.S. 629, 632-33 (1953)). To succeed in a bid protest, the protestor must establish that it was prejudiced by erroneous or im proper procedures. However, "[t]o establish prejudice, a protestor is not required to show that but fo r the alleged error, the protestor would have been awarded the contract." Data Gen. Corp. v. Johnson , 78 F.3d 1556, 1562 (Fed. Cir. 1986). See Statistica, Inc. v. Christopher , 102 F.3d 1577, 1581 (Fed. Cir. 1996) ("To establish competitive pr ejudice, a protester must demonstrate that but for the alleged error, there was a 'substantial chance that [it] would receive an awar d-that it was within the zone of active consideration.'") (emphasis in origi nal). These factual issues require review; the presence of unresolved issues negat es a ruling of "mootness": [J]urisdiction, properly acquired, ma y abate if the case becomes moot because (1) it can be said with assu rance that "there is no reasonable expectation . . ." that the alleged violation will recur, . . . and (2) interim relief or events have completely and irrevocably eradicated the effects of the alleged violation. County of Los Angeles v. Davis , 440 U.S. at 631. Neither of these criteria has been met. As to the first criterion, if there were i ndeed the alleged improprietie s, concealing them is the least likely way to prevent recurrence of the violation. As to the second criterion, the interim events included Avtel's insolvency, whos e effects surely have not been "completely and irrevocably eradicated." Further, Avtel's situation in the context of the California proceedings has not been explored. Paragraph 1 of that "General Assignment" includes "a ll choses in action . . . in which Assignor has an interest." Paragraph 5 states that: "Assignee in its own discretion, may determine whether to continue all or a par t of the business operations, or to liquidate2006-5060 6 assignor's assets." Paragraph 8 states t hat the Assignee has "t he right and power to institute and prosecute legal proceedings in the name of Assignor, t he same as if the Assignor itself had instituted and prosecuted such proceedings or actions." The panel majority's ruling that "the se ttlement agreement does not prov ide for ISG [the Assignee] to accept obligations for contracts not yet in existence" is of doubtful relevancy, for the Assignment is all-inclusive and it is not known what remedy would ensue if the protest were sustained. The protester is not required to affirmatively request only the minimal monetary relief in order to avoid "mootness." The judici al fashioning of appropriate relief, should the protest be sustained, is not befor e us. It is not correct to ru le that the protest cannot be made at all. Today's ruling of mootness has potentially broad consequences for government contracting, for it holds that if the losing bidder is pressed into insolvency while its protest is pending, the right to protest a wrongful award disappears. This is not correct law, and it subverts legislative policy. I respectfully dissent.